New York DFS Joins the Innovation Movement

Financial Services Law

Joining the innovation trend, the New York Department of Financial Services (DFS) announced the creation of a new Research and Innovation Division.

The new division will support internal transformation and market innovation, the regulator said, as it aims “to keep pace with the rapid technological changes in all sectors of the financial industry.”

What happened

Innovation has been a popular buzzword for financial industry regulators in recent months.

Last year, the Consumer Financial Protection Bureau (CFPB) established an Office of Innovation, with a stated goal of “creating policies to facilitate innovation, engaging with entrepreneurs and regulators and reviewing outdated or unnecessary regulations.”

Similarly, the Federal Deposit Insurance Corporation (FDIC) announced the creation of its own Office of Innovation to encourage banks to try out new financial technology, while the Securities and Exchange Commission (SEC) joined the party with its Strategic Hub for Innovation and Financial Technology, or FinHub.

The Financial Crimes Enforcement Network (FinCEN) launched an Innovation Hours program earlier this year, opening its doors each month to fintechs to present their new products and services for combating money laundering and terrorist financing.

On the state level, multiple states have formed “regulatory sandbox” programs, from Arizona to Wyoming and most recently, Nevada and Utah.

The DFS’s new division will be responsible for licensing and supervising virtual currencies, assessing new efforts to use technology to address financial exclusion, identifying and protecting consumer data rights and encouraging innovations in the financial services marketplace to preserve New York’s competitiveness as a financial innovation hub, Superintendent Linda A. Lacewell explained.

Matthew Homer will lead the new division in the role of executive deputy superintendent, with Matthew Siegel and Olivia Bumgardner as deputy superintendents and Andrew Lucas serving as counsel.

“The financial services regulatory landscape needs to evolve and adapt as innovation in banking, insurance and regulatory technology continues to grow,” Lacewell said in a statement. “This new division and these appointments position DFS as the regulator of the future, allowing the Department to better protect consumers, develop best practices and analyze market data to strengthen New York’s standing as the center of financial innovation.”

To read more about the new DFS division, click here.

Why it matters

The new division is the latest organizational shift by the DFS under Lacewell’s supervision, following the creation of a new Cybersecurity Division in June to help oversee the regulator’s Cybersecurity Requirements for Financial Services Companies. With the Research and Innovation Division reflecting the trend of regulators trying to stay at the forefront of technological change in the financial services industry, the DFS appears to be trying to position itself as a leader in fintech oversight.



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