NY DFS Proposes New Standards for Character and Fitness Assessments

The New York State Department of Financial Services (DFS) recently issued a proposal that would require covered institutions to review and assess the character and fitness of the directors, senior officers, and managers (designated persons) of such institutions at the time of onboarding and on a regular, ongoing basis.  Comments are due by June 30, 2023.

DFS would expect covered institutions to implement policies and procedures that require the vetting of designated persons’ character and fitness.  As part of the process of developing an appropriate framework, each covered institution is expected to define sensitive issues, warning signs, and other indicators that, if identified during the vetting process, warrant additional scrutiny before the designated person is brought on board.

The proposed guidance would be applicable to New York State-regulated banking organizations and non-depository financial institutions licensed or chartered under the New York Banking Law.  In describing which individuals qualify as “designated persons,” the guidance provides that it would apply to each member of a covered institution’s board of directors, board of trustees and/or board of managers, as applicable, and each senior officer.  An individual who meets the definition of “senior officer” provided in the guidance will be considered as such whether they have an official title or are serving without compensation.