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Financial Services Law Insights and Observations

New York requires regulated institutions to submit Covid-19 response plans by April 9

Licensing State Issues State Regulators NYDFS Consumer Protection Covid-19

The New York Department of Financial Services (DFS) has created a webpage providing information for industry and regulated entities.

On March 12, the New York Superintendent of Financial Services issued an order providing that regulated entities may temporarily relocate an authorized place of business and close any of their branch offices or locations if adversely affected by Covid-19 upon prompt written notice and compliance with the law, among other things.

On March 10, the New York State Department of Financial Services issued several industry letters related to the novel coronavirus known as “COVID-19.” Two of those letters require responses from New York regulated institutions no later than April 9, 2020. Responses must be submitted via e-mail to

In one letter, the NYSDFS encourages New York licensed lenders, among others, to evaluate how they may assist businesses that have been adversely impacted by COVID-19. Specifically, it suggests that such lenders consider easing new loan terms and waiving late fees, among other measures. Further, the NYSDFS explains that reasonable and prudent efforts to provide assistance to affected businesses are “consistent with safe and sound banking practices as well as in the public interest.”

In another letter, the NYSDFS requires New York regulated institutions to provide a response on the institution’s plans to manage the potential financial risk stemming from COVID-19. According to the letter, the plans should include, at a minimum, an assessment of the following:

  • Credit risk ratings of the customers, counterparties, and business sectors impacted by COVID-19.
  • Credit exposure to customers, counterparties, and business sectors impacted by COVID-19 arising from lending, trading, investing, hedging, and other financial transactions, including any credit modifications, extensions, and restructurings (including capitalizations of interest).
  • Scope and size of credits adversely impacted by COVID-19 that currently are in, or potentially may move to, non-performing/delinquent status, including consideration of stress testing and/or sensitivity analysis of loan portfolios and the adequacy of loan loss reserves.
  • Valuation of assets and investments that may be, or have been, impacted by COVID-19.
  • Overall impact of COVID-19 on earnings, profits, capital, and liquidity (including impact on loan-to-deposit ratio) of the institution.
  • Reasonable and prudent steps to assist those adversely impacted by COVID-19 (such as those described in the letter referenced immediately below).

In a third letter, the NYSDFS requires New York regulated institutions to provide a response on the institution’s plans to manage the risk of disruptions to its services and operations caused by COVID-19. According to the letter, the plans should include, at a minimum, the following:

  • Preventative measures tailored to the institution’s specific profile and operations to mitigate the risk of operational disruption, which should include identifying the impact on customers and counterparts.
  • A documented strategy addressing the impact of the outbreak in stages, so that the institution’s efforts can be appropriately scaled, consistent with the effects of a particular stage of the outbreak, which includes an assessment of how quickly measures could be adopted and how long operations could be sustained under different stages of the outbreak.
  • Assessment of all facilities (including alternative or back-up sites), systems, policies, and procedures necessary to continue critical operations and services if members of the staff are unavailable for long periods or are working off-site, including an assessment and testing as to whether large scale off-site working arrangements can be activated and maintained to ensure operational continuity. This would also include an assessment and testing of the capacity of the existing information technology and systems in light of a potential increased remote usage.
  • An assessment of potential increased cyber-attacks and fraud.
  • Employee protection strategies, critical to sustaining an adequate workforce during the outbreak, including employee awareness and steps employees can take to reduce the likelihood of contracting COVID-19.
  • Assessment of the preparedness of critical outside-party service providers and suppliers.
  • Development of a communication plan to effectively communicate with customers, counterparties, and the public, and to deliver important news and instructions to employees, along with establishing forums for questions to be asked and addressed.
  • Testing the plan to ensure the plan policies, processes, and procedures are effective.
  • Governance and oversight of the plan, including identifying the critical members of a response team, to ensure ongoing review and updates to the plan, including the tracking of relevant information from government sources and the institution’s own monitoring program.

DFS published a fourth industry letter to institutions engaged in virtual currency business activity setting forth guidance and a request for assurance to ensure that such regulated institutions have preparedness plans in place to address operational risk posed by Covid-19. In the guidance, DFS required every regulated institution to submit a response to DFS describing the plan of preparedness to manage the risk of disruption to its services and operations as soon as possible and no later than April 9, 2020 (30 days from the date of the guidance).

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