Top state financial regulator steps down

New York Department of Financial Services Superintendent Maria Vullo is stepping down as the state’s top banking and insurance regulator, and she is in no hurry to figure out what comes next. It will be hard for her next act to top the past three years. The department created regulations on cryptocurrency and cybersecurity that have become models for other states. Vullo has also cracked down on payday lenders and led the department’s efforts to push back against the Trump Administration’s attacks on the Affordable Care Act.

In an interview with City & State earlier this month, Vullo said she won’t be riding off into the sunset: public service is in her blood and the Brooklyn native is unlikely to leave New York anytime soon. The interview has been edited for length and clarity:

What are some of the highlights of your tenure?

When I arrived, cybersecurity was such a big issue. So, very soon after I arrived in February, 2016, we proposed our cybersecurity regulation in September of 2016 and I got that done in less than six months. The reason was, this was a real threat to the financial system and it was a thorough, complicated and detailed regulation that will stand the test of time. It’s not a regulation where, after a year you think: “Oh, we got to change this, change that.”

Then when the Equifax (customer information security) breach came, we did a regulation applying our cybersecurity regulation to credit reporting agencies as well. We then incorporated that into the work of the agency. We trained our examiners. We really did things holistically here on cybersecurity, which should also be a model for other regulators to follow.

Public service is often shaped by what’s happening outside and how you respond to what’s happening outside. So I arrived in February, 2016 and then in January, 2017 there is a new president. One of his main things have been efforts to attack women’s rights and attack affordable, quality healthcare. On the day of the Women’s March in 2017, we announced our contraception and abortion regulations mandating the coverage of women in New York without cost-sharing and requiring not only the contraceptive coverage but medically necessary abortions without cost-sharing. The abortion regulation I got sued on and last week we won.

Where was New York state at on cryptocurrency when you came in and where are we now?

We have seen in the last couple years the growth in this industry and I think what we have accomplished is that we have accomplished a regulated industry for cryptocurrency as a model. I have also done guidance on money laundering and market manipulation. We have required the companies to have very good compliance processes before we would approve any of the licenses.

Regulators don’t create business or industries, nor do we determine whether a business plan is a good one, but when you have a new type of industry or financial product, it’s important to set a responsible regulatory framework and identify what are the risks of the business. There’s lots of people who think there are risks in cryptocurrency, but a regulator shouldn’t run away from the risk. It should figure out what the right guardrails are.

What about Blockchain? Has there been a lot regulatory action on this outside of Bitcoin and cryptocurrency?

Blockchain itself is not regulated. Blockchain being used for digital currency purposes is regulated, because that activity is a financial service product. That’s where we get into this thing where some people say “You’re against innovation.” Technology itself is not regulated. The use of technology for certain activities may be regulated.

I didn’t know much about Blockchain before I took this job. It is an amazing development that has great promise for efficiency in transactions. There’s obviously costs under it but over time maybe those efficiencies will work out. The other thing about Blockchain in respect to digital currencies at least is that the record is there and so in some ways that could arguably be even more beneficial for law enforcement purposes than other type of financial services transmission. I’ve taken that into account when I think about the cryptocurrency space.

There were fears when Trump took office that he would have a light hand on Wall Street, how has DFS responded to that?

The loosening of regulations and the deregulatory environment in Washington, D.C. just creates more opportunities for greater risk taking. Then you combine that with other economic factors like inflation and tariffs, which could really have an impact on the financial markets. I feel really good about this department’s’ oversight and regulation of our state-chartered banks. We don’t regulate the national banks, but that doesn't mean I am not concerned with deregulation on the federal level because I am. The state banking system didn’t fail. The national banking system failed because of deregulation before the crisis of 2008-2009. So we have done a lot of things on the consumer front because of federal government policies.

How will you decide your next move?

Feb. 1 is my last day and after that I will give thought to what my next steps will be. I’m not going to reveal all of the different things that are in my head, but I certainly have some things I am thinking about. Whatever I do, it’s going to be something where it will impact real people in some measurable way, whether that’s a full-time thing or whether it’s part-time doing things like the nonprofit pro-bono cases I did in private practice.

I’m an Italian mom, OK? My kids are not Italian. They are from Guatemala; I adopted them. But I’m an Italian mom so I’m going to cook for them more which they’re very excited about and we’re going to continue to travel and do things like that. With jobs like this, it’s hard to be fully present.