Spurred on by New York Gov. Andrew Cuomo, the state’s top regulator is openly encouraging more federal credit unions to convert to a state charter.
The switch would serve competition and foster state growth, the Cuomo administration argues in undertaking conversion advocacy through Benjamin Lawsky, the state’s superintendent of the newly organized Department of Financial Services.
Such switches would also aid in providing banking services “to the unbanked and under-banked,” said Lawsky.
Just how many federal CUs would want or are poised now to make such a switch is unclear, said the New York Credit Union Association, which stressed that it does not endorse one structure over another.
However, “we have heard from a few federals expressing interest” in possibly making a change, said Michael Lanotte, senior vice president and general counsel, citing conditions impacting federal supervision under the NCUA.
Lanotte explained that the Cuomo policy encouraging conversion is contained in a new October restructuring law which combines the banking and insurance departments. The governor had pursued the agency merger as an efficiency move but also a fallout of the 2008-2009 financial crisis and “the gaps in our system of financial regulation.”
“Certain segments of the financial markets fell into these gaps with disastrous results,” Lawsky told a Dec. 1 House panel hearing on consolidation progress.
To help close those gaps “and ensure a renewed vigilance to prevent future systemic risk,” the merger was advanced “with a broad view of the entire range of financial services,” Lawsky said.
Lanotte said the trade group is currently awaiting final appointment by Lawsky of the top banking deputy in the department who would oversee CUs and banks.
In his testimony, Lawsky noted that the newly created agency now supervises “nearly 1,700 insurance companies with assets exceeding $4 trillion, nearly 300 state-chartered banks with assets of $2.1 trillion and more than 1,600 licensed financial entities including mortgage loan originators.”