At the behest of 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, claims the Cuomo administration in undertaking conversion advocacy as spelled out by Benjamin Lawsky, the state’s superintendent of the Department of Financial Services.
Such switches would aid in providing banking services “to the unbanked and underbanked,” said Lawsky.
Just how many federal CUs would want to make such a switch is unclear, said the New York Credit Union Association, stressing that it does not endorse either structure.
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 affecting federal supervision under NCUA.
Lanotte explained that the Cuomo policy encouraging conversion is contained in a new October restructuring law that combines the banking and insurance departments. The governor had pursued the agency merger as an efficiency move and in reaction to the 2008-2009 financial crisis, which “ gaps in our system of financial regulation.”
“Certain segments of the financial markets fell into these gaps with disastrous results,” explained Lawsky before a House panel hearing testimony 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, he added.
Lanotte said the trade group is currently awaiting final appointment by Lawsky of the top banking deputy in the department that 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.
