June 14, 2012

1. Regina A. Stone Deputy Superintendent June 14, 2012

2. Agenda • New York State Department of Financial Services • Risk Management • Resolution Planning For Discussion Purposes Only

3. New York State Department of Financial Services • Effective October 3, 2011 – New York State Banking and Insurance Departments merged into the Department of Financial Services • Encompassing Financial Products or Services offered in New York State • Five Divisions: • Banking Division • Insurance Division • Markets Division • Real Estate Finance Division • Financial Fraud and Consumer Protection Unit For Discussion Purposes Only

4. Risk Management

5. Different Types of Risks • Emerging Risks • Science/technology trends • Social trends • Regulatory trends • Full nature and effects of new type of risk area is not yet known • Risk of uncertainty • Traditional Risks • Emerging Risks • Risk of Uncertainty For Discussion Purposes Only

6. Risk Management and Internal Audit • Risk Management Assessments • General assessment of business risk • BSA/AML risk assessment • incorporating customer profiles and products and services • Audit risk assessment • Do the above reconcile? • The days of internal audit simply “ticking and tying” to existing policies and procedures are past. Internal audit needs to be trained in risk management to be able to identify holes within the risk management system. For Discussion Purposes Only

7. SYSTEMIC RISK AND RESOLUTION PLANNING

8. SYSTEMIC IMPORTANCE VARIATIONS • Single Chartered Institution • I.e. clearing organization • A Foreign Branch Part of a Globally Systemic Entity • NY Branch is systemically important to the global entity • NY branch is not systemically important to the global entity • However, may be interdependent or interconnected

9. Series of Questions • For Consideration: • Is the entity globally significant? • Is the entity significant to the U.S.? • Is the entity significant to New York State, i.e. local jurisdiction? • If no to all of the above, • Are there critical functions locally? • Are there interdependencies with the whole? For Discussion Purposes Only

10. Resolution Authority • Banking Law Article XIII • Merger • Voluntary Dissolution • Superintendent’s Taking Possession • Reorganization • Liquidation For Discussion Purposes

11. Taking Possession Condition • B.L. 605 • Violation of Law • Business in an unauthorized or unsafe manner • Unsound and unsafe condition • Cannot continue safe and sound business • Has a capital impairment • Has suspended payments • Failed to follow a Superintendent’s Order • Refused to submit records and affairs for inspection • Refused to be examined • Failed to take or continue a voluntary liquidation For Discussion Purposes

12. RESOLUTION SCENARIOS • Types of resolution scenarios • Recovery • Orderly Wind-down • Liquidation (Closure) • Dependent Upon • Speed and nature of deterioration • Liquidity vs. Non-liquidity • Market allowance • Importance of the payment systems • Final Resolution May Rest with the Primary Regulator • However, recognizing a changing regulatory reform landscape

13. Internal Audit • Risk Matrix basis vs. Legal Entity basis • Interconnected risk • Interdependence risk • Being able to “unplug” a business unit from the organization • Pre- and Post reviews of organizational changes For Discussion Purposes Only

14. For Discussion Purposes Only