The legislation that created the Department of Financial Services, known as the Financial Services Law, was introduced as part of Governor Andrew M. Cuomo’s 2011 budget.
The Governor's purpose in consolidating these two agencies and creating the Department of Financial Services or DFS is to modernize regulation by allowing the agency to oversee a broader array of financial products and services, rather than the previous system of limiting regulation to services provided by only certain types of institutions.
As of October 3, 2011 the New York State Banking Department and the New York State Insurance Department are abolished and the functions and authority of both former agencies transferred to the New York State Department of Financial Services.
The New York State Banking Department
In 1791, the New York State legislature authorized a charter for the first state bank, the Bank of New York.
A law in 1829 set up a Bank Fund later renamed the Safety Fund, to guarantee the payment of debts of insolvent state banks. All State-chartered banks were required to make an annual contribution to this fund, which was managed by the State treasurer. That same law provided for the appointment of three bank commissioners to examine the financial status of these banks and to report annually to the legislature. The Banking Law of 1838 required banks file certificates of incorporation with the Secretary of State and to report annually to the State Comptroller. In 1843, the Comptroller was authorized to examine a bank only when there was reason to suspect an incorrect report had been submitted or was in an unsafe and unsound condition to continue business.
The Banking Department was created by the New York state legislature on April 15, 1851. Until it was abolished in 2011, the New York State Banking Department was the oldest bank regulatory agency in the nation.
The New York State Insurance Department
Until 1849, insurance companies doing business in New York State were chartered by special acts of the Legislature. A law was passed that year requiring prospective insurance companies to file incorporation papers with the Secretary of State. The law also vested regulatory power over insurance companies with the State Comptroller, who was authorized to require the companies to submit annual financial statements and to deny a company the right to operate if capital securities and investments did not remain secure.
The Insurance Department was created in 1859 by the New York State Legislature and assumed the functions of the Comptroller and Secretary of State relating to insurance. The Department began operations in 1860.