Commission to keep NY’s financial sector competitive

By JOHN GRYBOS
Legislative Gazette Staff Writer

June 4, 2007

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New York’s status as the financial capital of the world and its importance as the state’s economic engine is encumbered by an outdated, fragmented regulatory system according to Gov. Eliot Spitzer’s 15th executive order.

To ferret out laws and policies that impede economic innovation, the executive order created the New York State Commission to Modernize the Regulation of Financial Services last Tuesday. It will comprise of at least 15 members from business, government and consumer organizations.

“The financial world has changed and we need to change with it,” said Spitzer. “This panel will help the state bring its regulatory structure into the 21st century.”

The financial services sector employs hundreds of thousands throughout New York, according to the executive order, and generates “by far” the greatest revenues of any other market in the state.

Financial services make up one-fourth of New York City’s economy, said Kathryn Wylde, president of Partnership for New York City, who will serve on the commission as a representative for consumer organizations.

“New York is under increasing competitive pressure from financial services around the world,” said Wylde. London and emerging centers in Asia and Australia increase companies’ choices when locating their headquarters, making a review of laws and regulations in New York a priority, she said.

New York City has a “disproportionate amount” of international and national headquarters for financial services firms conducting business around the world and in 50 states, said Wylde. The state’s regulations must be comparable to and competitive with many other jurisdictions’.

Keeping current is a major goal of the commission, as many of New York’s policies on financial services were penned decades ago, “before there were even computers,” said Wylde.

One example of outdated regulations, said Wylde, is that New York state still requires “wet signatures,” or handwritten, original marks on official documents, even though digital signing is often faster.

Compared to the business landscape following the Great Depression, when many of the state’s rules were crafted, “there’s an entirely new set of market factors as well as new technologies that change the way business is done,” Wylde said.

Of large concern are the increasingly similar financial services provided by banking and insurance companies, she said. Though their services may be identical, those services are regulated in different ways by different government agencies “who don’t necessarily talk to each other.”

The commission, said Wylde, will help foster a dialogue between the various heads of the four state agencies that oversee financial services in the state, ensuring uniform methods of regulating services that might be the same among companies in banking or insurance.

“There is a strong sense in this sector that we can do better,” said Matthew Maguire, director of communications for The Business Council of New York State. The president of the council will also serve on the commission. If the financial sector in the state doesn’t stay competitive, warned Maguire, New York’s position as a global finance center will be vulnerable and could be usurped by another metropolis.

New York is still the best address by far for financial services headquarters, Maguire said, “but we’re increasingly aware this industry is mobile.”

Streamlining the state’s regulations will help keep New York competitive, said Maguire. Ensuring a robust financial services sector in New York in the future is necessary because “when this sector has a good year, so does New York state.”

The commission’s final report is due by the end of this month.