1 00:00:00,040 --> 00:00:02,240 Speaker 1: Here in New York, it's all about the financial industry, 2 00:00:02,400 --> 00:00:05,480 Speaker 1: and we're welcoming the woman who really oversees all the 3 00:00:05,519 --> 00:00:08,240 Speaker 1: financial industry in the state of New York. She's Adrian Harris. 4 00:00:08,280 --> 00:00:11,360 Speaker 1: She's Superintendent of the New York State Department of Financial Services. 5 00:00:11,360 --> 00:00:14,080 Speaker 1: So welcome back. It's really great to have you, Adam, Superintendent. 6 00:00:14,160 --> 00:00:15,960 Speaker 1: So let's start with the banks. There's a lot of 7 00:00:15,960 --> 00:00:18,280 Speaker 1: things you have responsible. Let's start with the banks. Go 8 00:00:18,320 --> 00:00:20,279 Speaker 1: back to last March. We had a sort of a 9 00:00:20,360 --> 00:00:22,840 Speaker 1: hiccup in the system that had to do with some 10 00:00:22,960 --> 00:00:26,360 Speaker 1: interest rate risk, and we have some banks still to 11 00:00:26,400 --> 00:00:29,040 Speaker 1: this day who have a lot of losses on their 12 00:00:29,080 --> 00:00:31,040 Speaker 1: balance sheet with some of those longer term securities. How 13 00:00:31,080 --> 00:00:32,400 Speaker 1: big a problem is that right now? 14 00:00:32,800 --> 00:00:34,920 Speaker 2: Well, I think the banking system now is very stable 15 00:00:34,960 --> 00:00:37,440 Speaker 2: after the federal regulators took the actions they did with 16 00:00:37,479 --> 00:00:40,520 Speaker 2: the systemic risk exception in March. But there's still lots 17 00:00:40,520 --> 00:00:43,200 Speaker 2: of issues looming, as you mentioned the interest rate risk 18 00:00:43,240 --> 00:00:46,879 Speaker 2: and the unrealized losses. Certainly, commercial real estate exposure is 19 00:00:46,960 --> 00:00:49,440 Speaker 2: high on the minds of regulators all over the country. 20 00:00:49,520 --> 00:00:53,360 Speaker 2: So the regional banking crisis I think is over. The 21 00:00:53,400 --> 00:00:56,800 Speaker 2: banks are stabilized, but certainly we're mindful of other risks 22 00:00:56,800 --> 00:00:57,360 Speaker 2: in the system. 23 00:00:57,520 --> 00:00:59,960 Speaker 1: You mentioned real estate, and obviously that's a big top 24 00:01:00,240 --> 00:01:01,800 Speaker 1: here in New York City. We have a lot of 25 00:01:01,800 --> 00:01:04,440 Speaker 1: empty offices and it's not clear what's going to happen 26 00:01:04,520 --> 00:01:06,560 Speaker 1: with them. What about the time when those buildings need 27 00:01:06,600 --> 00:01:09,520 Speaker 1: to get refinanced. Could we have another form of a 28 00:01:09,560 --> 00:01:10,720 Speaker 1: crisis with the banks. 29 00:01:10,800 --> 00:01:13,280 Speaker 2: Yeah, it's an important issue. We look at our banks 30 00:01:13,280 --> 00:01:16,479 Speaker 2: and their real estate exposure, whether it's office space, multi 31 00:01:16,480 --> 00:01:19,000 Speaker 2: family housing. I think regulators across the country and in 32 00:01:19,160 --> 00:01:23,200 Speaker 2: Washington are looking at loan to value in the event 33 00:01:23,240 --> 00:01:26,720 Speaker 2: of a refinance, and we're looking at diversification. They're looking 34 00:01:26,760 --> 00:01:29,640 Speaker 2: at the segment overall to make sure that that risk 35 00:01:29,720 --> 00:01:33,160 Speaker 2: is being managed proactively before these loans come due, and 36 00:01:33,600 --> 00:01:35,600 Speaker 2: thinking about the new normal, what is this going to 37 00:01:35,600 --> 00:01:38,200 Speaker 2: look like post COVID. Are these office spaces going to 38 00:01:38,200 --> 00:01:40,680 Speaker 2: be converted to housing, especially in big cities where there 39 00:01:40,680 --> 00:01:43,520 Speaker 2: are housing shortages. So it really is a very interesting 40 00:01:43,560 --> 00:01:44,960 Speaker 2: policy area right now. 41 00:01:45,120 --> 00:01:47,440 Speaker 1: Hindsight's always twenty twenty and there's no point in saying 42 00:01:47,480 --> 00:01:48,960 Speaker 1: what it could have should it. At the same time, 43 00:01:49,080 --> 00:01:51,320 Speaker 1: we can learn from what happened the best and what 44 00:01:51,360 --> 00:01:54,480 Speaker 1: do you think regulators, including you, but not limited to you, 45 00:01:54,760 --> 00:01:56,600 Speaker 1: might have learned from what we went through with Silicon 46 00:01:56,680 --> 00:01:57,920 Speaker 1: Valley Bank and Signature Bank. 47 00:01:58,000 --> 00:02:00,160 Speaker 2: Yeah. I think there's so many learnings we've taken, and 48 00:02:00,840 --> 00:02:04,000 Speaker 2: DFS as well as other regulators published reports about that. 49 00:02:04,280 --> 00:02:07,000 Speaker 2: I think one is thinking about the modernization of regulation 50 00:02:07,360 --> 00:02:10,080 Speaker 2: when we think about the liquidity issues that these banks 51 00:02:10,080 --> 00:02:13,400 Speaker 2: we're facing, and how fast the deposits fled first from 52 00:02:13,440 --> 00:02:16,359 Speaker 2: Silicon Valley Bank and then how that fire spread from 53 00:02:16,440 --> 00:02:19,240 Speaker 2: California here to New York and other banks around the country. 54 00:02:19,600 --> 00:02:23,360 Speaker 2: Now understanding the digitization of money and how that impacts 55 00:02:23,360 --> 00:02:26,160 Speaker 2: deposit So, of course the FDIC is looking at the 56 00:02:26,240 --> 00:02:29,560 Speaker 2: insurance thresholds, but I'd spend a lot of time thinking 57 00:02:29,600 --> 00:02:33,760 Speaker 2: about how we operationalize our regulations. If we're examining banks 58 00:02:33,760 --> 00:02:36,600 Speaker 2: in a certain timeframe, can we make that examination go 59 00:02:36,880 --> 00:02:41,040 Speaker 2: faster without sacrificing rigor give feedback to the institutions more 60 00:02:41,120 --> 00:02:44,280 Speaker 2: quickly and then hold them accountable for remediation so that 61 00:02:44,280 --> 00:02:47,160 Speaker 2: that feedback loop becomes tighter and we don't have some 62 00:02:47,200 --> 00:02:49,840 Speaker 2: of the issues that happened with SVB and Signature where 63 00:02:49,840 --> 00:02:53,640 Speaker 2: things were going unremediated for cycle after cycle after cycle 64 00:02:53,720 --> 00:02:56,200 Speaker 2: with respect to examination. So there's a lot to be 65 00:02:56,320 --> 00:02:59,320 Speaker 2: learned with respect to the rules in particular, but also 66 00:02:59,360 --> 00:03:02,040 Speaker 2: how regulation are doing their job and how bank management's 67 00:03:02,080 --> 00:03:02,600 Speaker 2: doing their job. 68 00:03:02,720 --> 00:03:05,040 Speaker 1: Another area where you really have taken a leadership position 69 00:03:05,160 --> 00:03:08,079 Speaker 1: is on virtual assets, including crypto and things like that. 70 00:03:08,320 --> 00:03:10,840 Speaker 1: There were regulations in place before you came in, but 71 00:03:10,840 --> 00:03:14,320 Speaker 1: then you've really moved it forward fairly aggressively. At the 72 00:03:14,360 --> 00:03:16,000 Speaker 1: same time, last time we talked, we talked about what 73 00:03:16,040 --> 00:03:18,400 Speaker 1: about the Feds? Were the Feds and we thought we 74 00:03:18,400 --> 00:03:21,040 Speaker 1: were going to get legislation didn't happen. How much of 75 00:03:21,040 --> 00:03:22,520 Speaker 1: that at this point is a little bit of a 76 00:03:22,560 --> 00:03:26,040 Speaker 1: tug and pull about a state versus federal because you've 77 00:03:26,080 --> 00:03:28,800 Speaker 1: wanted parallel regulation, but it sounds like some people in 78 00:03:28,840 --> 00:03:29,600 Speaker 1: Washington don't want that. 79 00:03:29,840 --> 00:03:32,080 Speaker 2: I think that's right. We are very keen to make 80 00:03:32,120 --> 00:03:34,560 Speaker 2: sure that there is a federal regulator, a federal cop 81 00:03:34,600 --> 00:03:36,720 Speaker 2: on the beat in the virtual asset space because we've 82 00:03:36,720 --> 00:03:40,080 Speaker 2: seen the risks and the dangers that that space presents. 83 00:03:40,360 --> 00:03:41,880 Speaker 2: But we in New York have been leading in this 84 00:03:41,960 --> 00:03:44,440 Speaker 2: space for a long time. The regulations were in place 85 00:03:44,480 --> 00:03:46,840 Speaker 2: when I came into office. But now we've built a 86 00:03:46,880 --> 00:03:50,000 Speaker 2: team of over sixty professionals devoted to this day in 87 00:03:50,000 --> 00:03:52,640 Speaker 2: and day out. We've issued nine pieces of guidance. We 88 00:03:52,760 --> 00:03:57,720 Speaker 2: oversaw the unwinding of BUSD, so we're really leading here 89 00:03:57,760 --> 00:04:00,200 Speaker 2: and it'd be such a shame to lose that that 90 00:04:00,320 --> 00:04:02,960 Speaker 2: expertise and that experience. So just like we do on 91 00:04:03,000 --> 00:04:06,440 Speaker 2: the banking side, we're eager to see parallel regulation between 92 00:04:06,440 --> 00:04:09,720 Speaker 2: federal and state regulators, and that's reflected in some of 93 00:04:09,760 --> 00:04:12,400 Speaker 2: the bills we've seen moving in Washington. I'm hopeful that they'll. 94 00:04:12,200 --> 00:04:14,040 Speaker 1: Get done some of the bills, but there are reports 95 00:04:14,040 --> 00:04:15,800 Speaker 1: at least, and you can correct them if they're wrong. 96 00:04:15,880 --> 00:04:17,479 Speaker 1: That some people in the White House would like to 97 00:04:17,520 --> 00:04:19,640 Speaker 1: have preemption, essentially have the FEDS take it over. Is 98 00:04:19,680 --> 00:04:21,960 Speaker 1: that right, and if so, why are they doing that? 99 00:04:22,200 --> 00:04:25,640 Speaker 2: I think it's dangerous. I understand the desire to have 100 00:04:25,760 --> 00:04:28,680 Speaker 2: one set of rules and avoid what some people think 101 00:04:28,720 --> 00:04:31,120 Speaker 2: will be the race to the bottom. But you see 102 00:04:31,200 --> 00:04:33,160 Speaker 2: in New York what we have as the most rigorous 103 00:04:33,160 --> 00:04:35,800 Speaker 2: set of rules and regulations around the world. There's no 104 00:04:35,880 --> 00:04:38,599 Speaker 2: bigger crypto team than what we've built a DFS. There 105 00:04:38,640 --> 00:04:41,640 Speaker 2: are no more rigorous regulations anywhere in the world than 106 00:04:41,680 --> 00:04:43,120 Speaker 2: what we've had on the books, and I think it's 107 00:04:43,120 --> 00:04:44,160 Speaker 2: important to preserve that. 108 00:04:44,520 --> 00:04:46,200 Speaker 1: Let me ask you the obvious question, if we had 109 00:04:46,240 --> 00:04:49,360 Speaker 1: all the right regulations, could we have avoided FTX as 110 00:04:49,360 --> 00:04:51,480 Speaker 1: we're watching that trial go on just a few miles 111 00:04:51,520 --> 00:04:52,000 Speaker 1: out of here. 112 00:04:52,080 --> 00:04:53,960 Speaker 2: Well, we did in New York where FTX was not 113 00:04:54,120 --> 00:04:56,360 Speaker 2: licensed to do business and they made public that they 114 00:04:56,360 --> 00:04:59,720 Speaker 2: were seeking a license from DFS and they didn't get one. 115 00:05:00,040 --> 00:05:02,640 Speaker 2: In fact, their very business model was antithetical to the 116 00:05:02,640 --> 00:05:05,080 Speaker 2: standards we have on the books. So if we had 117 00:05:05,120 --> 00:05:07,520 Speaker 2: that nationwide, I think we would have been much better off. 118 00:05:07,560 --> 00:05:10,480 Speaker 1: You've been forward leading on cybersecurity. I understand you've been 119 00:05:10,640 --> 00:05:13,480 Speaker 1: contemplating apostile regulation. Where does that stand right now and 120 00:05:13,480 --> 00:05:15,760 Speaker 1: what would it do if you did adopt it now? 121 00:05:15,920 --> 00:05:18,520 Speaker 2: New York has been leading in cybersecurity with the original 122 00:05:18,520 --> 00:05:22,520 Speaker 2: cybersecurity rag that was promulgated in twenty seventeen, became the 123 00:05:22,600 --> 00:05:26,040 Speaker 2: model for federal regulation and for other states across the country. 124 00:05:26,240 --> 00:05:29,279 Speaker 2: We're now in the process of amending and updating that regulation, 125 00:05:29,400 --> 00:05:31,760 Speaker 2: so that will come out soon. But we're focused on 126 00:05:31,800 --> 00:05:34,760 Speaker 2: things like how we tailor the regulation for the diverse 127 00:05:34,800 --> 00:05:37,679 Speaker 2: sets of businesses that we regulate, from insurance to banking 128 00:05:37,720 --> 00:05:41,880 Speaker 2: to crypto. We're thinking about governance and incident response and 129 00:05:41,960 --> 00:05:45,159 Speaker 2: business continuity, and of course ransomware, because this is a 130 00:05:45,160 --> 00:05:47,760 Speaker 2: thing that didn't exist the way it does today six 131 00:05:47,839 --> 00:05:50,520 Speaker 2: years ago when the reg was originally promulgated. So this 132 00:05:50,600 --> 00:05:53,160 Speaker 2: is an update that we have to make. So I'm 133 00:05:53,200 --> 00:05:56,159 Speaker 2: eager to get this out. You'll see it soon, but 134 00:05:56,240 --> 00:05:57,680 Speaker 2: we're excited about the standards. 135 00:05:57,680 --> 00:05:59,320 Speaker 1: You've got a lot on your platter. Do you have 136 00:05:59,400 --> 00:06:01,599 Speaker 1: the resources you need to really address it? I mean, 137 00:06:01,640 --> 00:06:03,800 Speaker 1: because right now New York State doesn't have a lot 138 00:06:03,839 --> 00:06:05,560 Speaker 1: of extra money floating around that I've heard about. 139 00:06:06,080 --> 00:06:08,719 Speaker 2: Well, we are assessment funded at DFS, so we cost 140 00:06:08,760 --> 00:06:13,279 Speaker 2: the taxpayer nothing. We then refund about five hundred million 141 00:06:13,360 --> 00:06:15,200 Speaker 2: dollars a year to the state in the form of 142 00:06:15,320 --> 00:06:19,919 Speaker 2: restitution reappropriated assessment money. So just in the two years 143 00:06:19,920 --> 00:06:22,320 Speaker 2: that I've been at DFS, we've gotten two hundred and 144 00:06:22,400 --> 00:06:25,440 Speaker 2: seventy seven million dollars back to New Yorkers in the 145 00:06:25,440 --> 00:06:28,479 Speaker 2: form of restitution. So it's really a great investment where 146 00:06:28,480 --> 00:06:31,080 Speaker 2: you don't have taxpayer money to fund the agency, but 147 00:06:31,160 --> 00:06:34,120 Speaker 2: you get that much return, but any regulator will tell 148 00:06:34,160 --> 00:06:37,600 Speaker 2: you that they need more more bodies. In fact, in 149 00:06:37,640 --> 00:06:40,240 Speaker 2: my two years at DFS, we've hired three hundred and 150 00:06:40,279 --> 00:06:43,440 Speaker 2: fifty people. We've promoted about two hundred and fifty people, 151 00:06:43,680 --> 00:06:46,000 Speaker 2: but that's just the beginning. We're still so short staffed, 152 00:06:46,040 --> 00:06:48,719 Speaker 2: and I'm looking forward to continue to build the agency because, 153 00:06:48,720 --> 00:06:50,800 Speaker 2: as you said, we've got such a broad remit and 154 00:06:50,839 --> 00:06:52,080 Speaker 2: so much we're responsible for. 155 00:06:52,320 --> 00:06:55,280 Speaker 1: Finally metisode Soda. You've talked about New York State as 156 00:06:55,360 --> 00:06:59,480 Speaker 1: being the world's financial capital. Is it still today after 157 00:06:59,560 --> 00:07:02,120 Speaker 1: all that is happened? And what do you need to 158 00:07:02,160 --> 00:07:04,280 Speaker 1: do to try to ensure it will be tomorrow? 159 00:07:04,400 --> 00:07:06,400 Speaker 2: I think it is absolutely and I was just hosting 160 00:07:06,640 --> 00:07:09,479 Speaker 2: a delegation from the UK. I've hosted delegations from the 161 00:07:09,560 --> 00:07:13,160 Speaker 2: UAE and similarly gone to their jurisdictions. New York still 162 00:07:13,240 --> 00:07:15,400 Speaker 2: is the financial capital of the world, but we can't 163 00:07:15,480 --> 00:07:18,720 Speaker 2: rest on our laurels. And the trick is having robust 164 00:07:18,720 --> 00:07:22,640 Speaker 2: regulation that protects consumers and markets, but also that grows 165 00:07:22,680 --> 00:07:25,800 Speaker 2: a healthy and thriving competitive marketplace, and I think both 166 00:07:25,800 --> 00:07:27,120 Speaker 2: can be accomplished at the same time. 167 00:07:27,120 --> 00:07:28,960 Speaker 1: Well, that's the question, is it is zero sum? Game. 168 00:07:29,040 --> 00:07:30,880 Speaker 1: The more regulation you have, the less people want to 169 00:07:30,880 --> 00:07:31,400 Speaker 1: be here. 170 00:07:31,280 --> 00:07:33,520 Speaker 2: Now, not at all, in fact, to the contrary, especially 171 00:07:33,600 --> 00:07:36,160 Speaker 2: in crypto, where we've seen we have the most rigorous 172 00:07:36,160 --> 00:07:39,600 Speaker 2: regulations on the books and the demand for our licenses 173 00:07:39,640 --> 00:07:42,200 Speaker 2: and charters only goes up into the right because companies 174 00:07:42,200 --> 00:07:45,200 Speaker 2: get that clarity from the regulator, and so it drives 175 00:07:45,320 --> 00:07:46,520 Speaker 2: demand to be in the market. 176 00:07:46,800 --> 00:07:48,880 Speaker 1: Superintendent, thank you so much for coming back again. It's 177 00:07:48,920 --> 00:07:51,480 Speaker 1: really great to have you. That's Adrian Harris. She's superintendent 178 00:07:51,600 --> 00:07:54,120 Speaker 1: of the New York Department of Financial Services.