The Oddly Confrontational Strategies in 'Bank of Tokyo-Mitsubishi-Union v. DFS'
The position of the DFS is that to allow a bank to jump to another regulator when the state is poised to continue discipline punctuated with prior consent orders is like letting a thief find sanctuary by crossing state lines.
September 11, 2018 at 12:55 PM
11 minute read
Disputes between bank regulators and banks rarely get to court. The grudges of a challenged regulator, winner or loser, may be too daunting. They almost inevitably settle. Indeed, the last time a major bank indicated it would fight the disciplinary agenda of the New York State Department of Financial Services, DFS announced in 2012 it would up the ante by putting the license of the bank (Standard Chartered) on the line. Shortly thereafter that bank folded and settled.
The pending federal action in Manhattan between BTMU and DFS is the rare exception. The bank and the regulator are exposed to significant risks. Bank of Tokyo Mitsubishi UFJ (BTMU) v. Maria Vullo (as head of the Department of Financial Services), No. 1:17-cv-08691-SHS. The Office of Comptroller of the Currency (OCC) (as amicus) finds itself facing accusations of lack of independence, lack of regulatory rigor and of being the vehicle for the political gerrymandering of a bank license, even though it is not a party. Judicial involvement may clarify ordinarily elusive issues.
Can a branch of a foreign bank under a state consent order switch from state to OCC (federal) licensure without the state's consent? BTMU has attempted just such a switch. If it cannot, BTMU will have one really angry state regulator. DFS, on the other hand, gambles that its aggressive role in seeking to enforce paradigmatically federal obligations, like Office of Financial Assets Control (OFAC) sanctions requirements, may come under federal preemption scrutiny. It could also lose more of the banks it has fined so heavily over the years.
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