New criteria will look at unrealized losses and uninsured deposits, in addition to capitalization ratios of banks applying for designation to hold public deposits.
New York City Comptroller Brad Lander, New York City Mayor Eric Adams, and New York City Department of Finance (DOF) Commissioner Preston Niblack announced stronger measures to assess bank financials as part of the New York City Banking Commission’s biennial process to designate banks to hold the City of New York’s deposits. This year, the Banking Commission will hold a public hearing for the first time and include new criteria for evaluating the soundness of depository banks.
The proposed changes come at a time of heightened turmoil for the banking sector and reflect the Commission’s efforts to strengthen oversight of banks that hold city deposits. The new criteria follow an announcement in February of revisions to the required certificates banks must submit to demonstrate detailed plans and specific steps to combat different forms of discrimination in their operations. Designated banks will be eligible to hold New York City deposits and contract to provide banking services to City agencies. By law, the banks must provide total collateralization for the City’s deposits.
“Recent turmoil and uncertainty in the banking sector has magnified the need for stronger oversight of the banking industry,” said New York City Comptroller Brad Lander. “Banks given the opportunity to do business with the City must be well-equipped to manage public funds responsibly and also actively working to root out discrimination endemic in the industry. At our initiation, the NYC Banking Commission is stepping up to use the tools at our disposal to ensure taxpayer dollars and our economy remain on sound footing.”
“The ongoing concerns over the state of our financial system underscore the importance of strengthening oversight measures on banks holding city deposits and protecting taxpayer dollars,” said New York City Mayor Eric Adams. “These new proposed rules will ensure our city is well-equipped to weather uncertainties in the fiscal and economic climate today and in the future.”
“The biennial designation of depository banks provides an opportunity for the Banking Commission to review the soundness and qualifications of applicant institutions,” said Finance Commissioner Preston Niblack. “Having a diverse set of well-run, qualified banks ensures that we are protecting taxpayer funds and supporting communities.”
New Yorkers are invited to submit testimony in advance of or during a first-time public hearing on Thursday, May 25th. More information can be found online.
In addition to the new public engagement process, the Commission has released new criteria with three key metrics for assessing bank performance and whether they are suited to hold deposits.
Banks will be assessed using the following criteria:
- Tier 1 capital ratio which compares a bank’s equity-capital to their risk-weighted assets.
- Percentage of uninsured deposits, which are deposits in each account that exceed the Federal Deposit Insurance Corporation’s current $250,000 limit.
- Unrealized losses on assets held to maturity as a percentage of Tier 1 capital, as a measure of risk tied to interest rates.
The strengthened oversight during the designation process follows an April 2022 announcement by Comptroller Lander and Mayor Adams to suspend the opening of any new depository accounts with major mortgage lender Wells Fargo.
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