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New York’s financial watchdog is ready to “fill the gaps” left by the incoming Trump administration’s planned deregulation spree, its chief has said, by increasing its scrutiny on banks, insurance companies and cryptocurrency groups that transact in the world’s commercial capital.
Adrienne Harris, head of the state’s Department of Financial Services, which licenses many of the globe’s largest financial institutions including Goldman Sachs, ICBC and Deutsche Bank, told the Financial Times that a rollback of federal regulations would “certainly increase the volume of consumer protection cases that we may bring on the enforcement side”.
“We’re going to keep focusing on getting money back for consumers,” said Harris, whose office has hired hundreds of new staffers in the past couple of years. While emphasising that her office was “not ideological”, she added: “If there are new gaps that emerge because we don’t have a partner then we’ll work to fill those gaps as appropriate.”
Harris, who also serves as the state representative on the national Financial Stability Oversight Council, which assesses risks within the US financial system, added she would, if necessary, ask New York’s governor for more powers to combat the loosening of federal regulations.
On the campaign trail, Donald Trump vowed to pursue the “most aggressive regulatory reduction” in the US’s history, and his allies have suggested culling entire regulatory bodies. That includes the Consumer Financial Protection Bureau, an agency instituted in response to the global financial crisis to toughen oversight of consumer financial products, which has become a perennial target of Republican complaints.
Last month, he nominated cryptocurrency advocate Paul Atkins — a critic of the Dodd-Frank reforms Congress passed to reduce risk in the financial system — to take over as head of the Securities and Exchange Commission and pursue “common sense” regulation. Trump’s team has also reportedly discussed shrinking or abolishing the Federal Deposit Insurance Corporation, which protects consumers from lenders going bankrupt.
Various regulators in Democratic states have been preparing for any expected breaches caused by deregulation in the new Trump administration. California has forged ahead with tougher pollution and emissions rules, while New York, Illinois and Washington are forcing through state-level climate disclosure requirements.
When it comes to financial oversight, the DFS had “quite broad powers” over licensees, said Matt Levine, a former executive deputy superintendent for enforcement at the agency. It is also able to bring non-licensees to heel via a provision in the federal Consumer Financial Protection Act to police “unfair, deceptive, or abusive” practices.
The act was a “significant tool that DFS could try and wield if it wants to”, added Levine, who was at DFS during the first Trump administration, and is now a partner at Elliott Kwok Levine. “If enforcement by the CFPB is rolled back, there is an opportunity for DFS to step into that void in a number of the same areas.”
Harris, a former official in the Barack Obama administration who New York governor Kathy Hochul appointed in 2021, dismissed the idea that increased scrutiny of financial services groups in the heavily-Democratic state would prompt businesses to relocate to more lax jurisdictions, such as Florida or Texas.
“There’s always a healthy tension,” Harris said. “Companies want approvals faster, we want to make sure things get appropriately scrubbed to mitigate risk . . . But no, we don’t hear people talking about relocating.”
New York’s position as the US’s financial capital would prove resilient, she predicted, comparing the state to London’s position within Europe. “London is still really the financial capital, right?” Harris said. “It didn’t move to Paris or Frankfurt as a result of Brexit.”
Talk of Miami becoming the new financial epicentre of the US ended up being “sort of a flash in the pan”, the superintendent added, saying “consumers like to see that Good Housekeeping seal of approval” that comes with being regulated by a body such as the DFS.
Harris also pushed back on the idea that the DFS should toughen its stance on cryptocurrencies, if the Trump administration reverses some of the efforts to rein in the nascent industry led by outgoing SEC chair Gary Gensler.
Crypto “exists and it’s here and it’s growing”, Harris said. “I think we have a responsibility as regulators not to pass judgment, to say, well, it’s not valuable, it doesn’t present any real use case, and therefore we don’t have a responsibility to regulate it. I don’t think that’s the right answer, nor do I think it’s the right answer to take the extreme opposite view.”
