Barefoot Innovation Podcast

Today’s show is a special one because it includes breaking news. My guest is Linda Lacewell, the New York State Superintendent of the Department of Financial Services, and she will not only share her program for innovating in the midst of a pandemic, but will also announce an exciting initiative: that DFS is working with us at AIR to host New York’s first-ever regulatory tech sprint, in partnership with the Conference of State Bank Supervisors (CSBS). The sprint will take on one of the most daunting challenges facing regulators today, namely, how to get more information, faster, about the companies they oversee, without escalating the burdens of regulatory reporting on the industry, in the midst of a crisis.

The need for more, better, faster regulatory information has been increasingly clear for years, but this year’s pandemic has made it truly urgent. In an environment where massive shifts can occur in just days -- for companies, consumers and whole sectors -- regulators find themselves unable to count on old, analog, periodic reports to stay on top of their work. This challenge is especially acute for state regulators, since they oversee both banks and nonbanks like mortgage and small business lenders, money transmitters, and cryptocurrency firms, which typically submit reports to their regulators at long intervals, often annually. Even for bank regulation, agencies receive the primary update reports just quarterly. 

At the same time, however, a pandemic and economic contraction is not the time to load new regulatory requirements onto COVID-stressed companies, and especially on small ones.

There is a promising solution to this dilemma. Regulators increasingly are finding ways to gather additional information digitally, in real-time, and through low-cost digital channels. 

How can this best be done? The perfect way to explore that question is to hold a TechSprint -- a regulatory hackathon. And so we at AIR will be working with DFS and CSBS to do so early next year. It will be the first-ever TechSprint for DFS and will focus on a sector that is already equipped with digitally-native technology and information systems -- cryptocurrency companies, of which the DFS is the country’s premier regulator.

Digital Regulatory Reporting, or DRR, was already on an exciting innovation path prior to the pandemic, with at least three other major projects underway globally. The UK Financial Conduct Authority has a major initiative coming to fruition. The G20 ran a tech sprint this year that included a DRR use case (for which I served as a judge). And the FDIC is running a rapid prototyping project focused on modernizing the Call Report. The New York sprint will tackle the reporting issue from a new angle that can be a model of innovation for all. Here is more information on the project’s plans and progress.

My conversation with Commissioner Lacewell covered a wide spectrum of other topics as well. 

Even before the pandemic hit, she had undertaken an ambitious innovation agenda under the leadership of Matt Homer, who had launched a range of initiatives and then ramped them up quickly as the crisis struck last March. The Commissioner tells a gripping story of her role in helping guide New York through the terrible early days in the first wave of Coronavirus in the United States. She talks about government technology struggling to come out of the “dark ages” to keep up with the crisis. She talks about the inequities the pandemic has revealed and exacerbated in US society, as well as the racial reckoning spurred by the killing of George Floyd, and describes what the DFS is doing to help. She talks about DFS’s role in international financial regulation. 

And she asks us to imagine a world in which regulators have a dashboard view of what’s happening in the system, all the time, to enhance their work in normal times and to navigate safely in times of crisis. As she says, “it’s all about the data.”

More on Linda

Linda A. Lacewell is the third Superintendent of the New York State Department of Financial Services. DFS supervises the activities of nearly 1,500 banking and other financial institutions with assets of more than $2.6 trillion and more than 1,800 insurance companies with assets of more than $4.7 trillion.

A member of Governor Andrew M. Cuomo’s cabinet, Superintendent Lacewell has dedicated her career to serving the public. Since taking office in 2019, she has supported innovation and strengthened cybersecurity in the financial services industry by creating Research and Innovation and Cybersecurity divisions at the department;

• She has strengthened DFS’s reputation as a national leader in consumer protection, appointing the Department’s first Consumer Advocate and Consumer Protection Task Force;
• Championed financial inclusion and diversity – bringing bank branches into underserved areas across New York State, creating a committee to promote women leadership in financial services; and hiring a diverse and talented leadership team;
• Fostered cooperation and collaboration with the Department’s international counterparts to safeguard the global financial system and committed to fighting climate change.
• Contributed to New York’s progressive achievements by helping codify the Affordable Care Act and Mental Health Parity and Addiction Act into New York State law. 

Superintendent Lacewell was the architect of OpenNY, a state-of-the-art open data initiative. She also served as special counsel to Attorney General Cuomo, where she oversaw a public pension fund pay-to-play investigation and an out-of-network health insurance investigation, both of which led to nationwide systemic reform. Prior to that she spent nine years as an Assistant U.S. Attorney for the Eastern District of New York, including two years on the Enron Task Force. She received the Henry L. Stimson Medal and the Attorney General’s Award for Exceptional Service.

More for our Listeners

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Future shows:

We have wonderful guests coming up. They include Scott Cook, Founder of Intuit; Renaud Laplanche, Co-founder and CEO of Upgrade; Ann Cairns, Executive Vice Chair of Mastercard; Jeremy Allaire, CEO of Circle; and Ross Burhdorf and Lamine Zarrad of ZenBusiness. We’ll also welcome back former CFTC Chairman Chris Giancarlo, along with Daniel Gorfine, to talk about the Digital Dollar Project.

We will also have CFTC Chairman Heath Tarbert in our Future of Regulation Series, as well as a conversation with former FDIC Chairman William Isaac.

In addition, I am going to be reading the whole Regtech Manifesto in podcast form, for those who would rather listen than read. Watch for that coming soon!

Be sure to join me virtually at some of my next speaking engagements. These include Summit on Making Finance Work for Women, the A-Team Regtech Summit, Central Bank of the Future, DC Fintech Week, and Fintech Americas, as well as the Singapore Fintech Festival and Fintech Abu Dhabi.

As always, keep innovating!