The New York State Department of Financial Services (DFS) is the department of the New York state government responsible for regulating financial services and products, including banking and financial services firms. On July 29, 2021 DFS Superintendent Linda A. Lacewell announced new action by DFS to promote diversity, equity and inclusion in the banking and non-depository financial industries.
In the industry letter to New York-regulated banking institutions and New York-regulated non-depository financial institutions, DFS outlined its expectation that these organizations make the diversity of their boards and senior leadership a business priority and a key part of their corporate governance, including creating and maintaining a diverse pipeline of future leaders.
DFS said that it determined that the best way to support the industry’s diversity efforts is by collecting and publishing data relating to the diversity of corporate boards and management in the hopes that making that information public will allow companies to assess where they stand compared to their peers and raise the bar for the entire industry. The letter explained that DFS has broad statutory authority to ensure the stability of New York’s Regulated Banking Institutions and Regulated Non-Depository Financial Institutions to protect the public interest, the interests of depositors, creditors and consumers, and to promote the growth of the industry and to request special reports. More specifically, the data request was grounded in Banking Law §37(3), under which the Superintendent may require any banking organization to make special reports to her at such times as she may prescribe.
As a first step, DFS will collect data from all New York-regulated Banking Institutions with more than $100 million in assets, and all Regulated Non-Depository Financial Institutions with more than $100 million in gross revenue. But there was another category from which data is going to be required and to which the $100 million threshold does not apply. That is, all entities authorized to engage in virtual currency business activity, including virtual currency licensees (“BitLicensees”) and virtual currency trust companies. The justification for singling out the crypto industry can be found in the following excerpt from the letter:
Female participation in the cryptocurrency community is very low. The percentage of women in the sector, including developers, investors, and interested individuals, usually hovers between 4% and 6%. Data from 2020 shows that Bitcoin community engagement by gender reached 86% male and 14% female, representing a small upturn in female representation. Of the 378 venture-backed cryptocurrency and Blockchain companies founded around the world between 2012 and 2018, 92% had a founding team that was entirely male. By comparison, 82% of all technology companies started in that period had all male founders. Additionally, a report from Forbes detailing the richest people in cryptocurrency included 19 people, all of whom were white or East Asian men.
For those entities required to report, DFS will collect data related to the gender, racial and ethnic composition of their boards or equivalent body and senior management as of December 31, 2019 and 2020, including information about board tenure and key board and senior management roles. The data will be collected in the fall of 2021 and published on an aggregate basis in the first quarter of 2022.