- Jun 6, 2007
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Yesterday the Wall Street Journal had an article about the state of New York’s Bank regulator, raising the question of whether or not they were being overly aggressive. The facts are that a United Kingdom bank, Standard Charter Bank, several years ago came under strong scrutiny from New York’s Bank regulator, to respond to this they hired the financial consulting firm Promontory Financial Group to help defend against any finding of wrongdoing by this state regulator! Promontory drew up reports on relevant issues and drafted correspondence to the state regulator on behalf of Standard Charter. As it turned out the NY regulator found wrongdoing on Standard Charter’s part and Standard Charter ended up paying around $1 billion dollars in multiple settlements with this regulator.
However, New York’s Bank Regulator found a big problem with Promontory’s behavior and most crucially want to block them from doing any future financial consulting work with banks regulated by this New York regulator besides fining them for wrongdoing. Specifically, the New York Bank Regulator’s problem with Prothontory’s behavior on the Standard Charter Bank matter was that Prothontary was not “candid”, they put things in the best light of Standard Charter and they did not hold the regulator’s perspective in their correspondence and dealing with the state regulator, There has been no allegation of fraud by Prothontory toward the regulator.
The State of New York’s Bank Regulator’s position here is unreasonable, unfair and preposterous! Prothontory was hired by Standard Charter to protect its interests against the state regulator and Standard Charter was paying Prothontory’s bill. For these reasons Prothontory duty of loyalty was to Standard Charter not to the state regulator their duty was to be an advocate on Standard Charter’s behalf. Prothontory was not hired like a financial institution would hire an accounting firm to do an independent audit of the institution there was no duty on Prothontory’s behalf to be independent just the opposite their duty was to be an advocate just like if Standard Charter hired a law firm to help the bank with this New York Bank Regulator scrutiny!
The New York Bank regulator seems to be developing a track record to try to prevent financial consulting firms from fulfilling their obligations to the financial institutions that hire them to be advocates on their behalf. The New York Bank Regulator seems to be under the impression they have the power to intimidate and pressure these consulting firms to not obstruct them in their pursuit of their regulatory goals. The circumstances seems to call for the New York Bank Regulator management to receive a rude awakening. This could be achieved by a good Judge enjoining the NY Bank Regulator to stop these penalty pursuits and ordering the bank regulator to pay these consulting firms legal costs and threatening to hold the regulator managers in contempt and throw them in jail if they continue this abuse of power. Maybe what needs to take place is that the financial industry as a whole has to go to the governor of New York and the leadership of the New York legislature and say you folks need to pass some legislation that reins in the state’s bank regulator from this overzealous regulation that obstructs us from protecting ourselves or we are going to move our industry out of your state!
However, New York’s Bank Regulator found a big problem with Promontory’s behavior and most crucially want to block them from doing any future financial consulting work with banks regulated by this New York regulator besides fining them for wrongdoing. Specifically, the New York Bank Regulator’s problem with Prothontory’s behavior on the Standard Charter Bank matter was that Prothontary was not “candid”, they put things in the best light of Standard Charter and they did not hold the regulator’s perspective in their correspondence and dealing with the state regulator, There has been no allegation of fraud by Prothontory toward the regulator.
The State of New York’s Bank Regulator’s position here is unreasonable, unfair and preposterous! Prothontory was hired by Standard Charter to protect its interests against the state regulator and Standard Charter was paying Prothontory’s bill. For these reasons Prothontory duty of loyalty was to Standard Charter not to the state regulator their duty was to be an advocate on Standard Charter’s behalf. Prothontory was not hired like a financial institution would hire an accounting firm to do an independent audit of the institution there was no duty on Prothontory’s behalf to be independent just the opposite their duty was to be an advocate just like if Standard Charter hired a law firm to help the bank with this New York Bank Regulator scrutiny!
The New York Bank regulator seems to be developing a track record to try to prevent financial consulting firms from fulfilling their obligations to the financial institutions that hire them to be advocates on their behalf. The New York Bank Regulator seems to be under the impression they have the power to intimidate and pressure these consulting firms to not obstruct them in their pursuit of their regulatory goals. The circumstances seems to call for the New York Bank Regulator management to receive a rude awakening. This could be achieved by a good Judge enjoining the NY Bank Regulator to stop these penalty pursuits and ordering the bank regulator to pay these consulting firms legal costs and threatening to hold the regulator managers in contempt and throw them in jail if they continue this abuse of power. Maybe what needs to take place is that the financial industry as a whole has to go to the governor of New York and the leadership of the New York legislature and say you folks need to pass some legislation that reins in the state’s bank regulator from this overzealous regulation that obstructs us from protecting ourselves or we are going to move our industry out of your state!
