- NYDFS has
strengthened oversight following the 2023 failure of Signature Bank.
- Superintendent
Adrienne Harris announced new escalation protocols for struggling banks.
- Banks with
persistent weak ratings—“C students”—will face heightened scrutiny.
- The reforms
include faster regulatory exams and proactive intervention measures.
- NYDFS now
requires operational stress tests to assess banks' crisis preparedness.
- The bank’s
collateral estimates fluctuated from $6 billion to $500 million in hours.
The New York Department of Financial Services (NYDFS) has introduced stricter oversight measures in response to the failure of Signature Bank in 2023, according to Superintendent Adrienne Harris.
Speaking at the Brookings Institution, Harris explained that the regulator has implemented new escalation protocols to identify persistent weaknesses in banks before they escalate into crises.
This move follows a broader evaluation of regulatory practices after a series of regional bank failures, including those of Silicon Valley Bank and First Republic Bank.
Signature Bank’s collapse, the fourth largest in U.S. history, exposed vulnerabilities in liquidity risk management across the banking sector.
Harris noted that many struggling institutions had received subpar ratings in critical areas but were not subject to timely intervention.
To address this, NYDFS launched a comprehensive review of banks under its jurisdiction, identifying those with consistently poor performance—what Harris referred to as the "C students" of the financial world.
The agency’s new approach ensures that persistent weaknesses are escalated to executive management, triggering further review, additional exams, or enforcement actions such as consent orders.
The regulatory reforms include a revised examination process that shortens review periods and provides more real-time guidance to banks.
Harris emphasized the importance of early intervention, stating that without proactive measures, regulators cannot take the necessary steps to prevent instability.
In addition to the new protocols, NYDFS has introduced operational stress testing exercises to ensure that banks can quickly and accurately assess their liquidity in crisis scenarios.
Harris recounted that during Signature Bank’s collapse, the institution failed to provide accurate data on its available collateral, fluctuating from an estimated $6 billion to just $500 million within a 12-hour span.
This failure to produce reliable financial information in real-time underscored the need for stress testing, which NYDFS has now implemented across a variety of financial institutions.
The regulator’s heightened scrutiny aims to prevent future banking crises by enforcing accountability and requiring banks to demonstrate resilience under pressure.
As Harris pointed out, crisis management plans are only effective if they are tested in realistic scenarios, rather than remaining theoretical documents sitting on a shelf.
The new measures reflect a broader effort to strengthen the financial sector’s ability to weather instability while ensuring greater transparency and regulatory responsiveness.
