Wall Street is waiting to see if the next head of the New York State Department of Financial Services will be as aggressive as the first two chiefs.
The department, created in 2011 by New York Governor Andrew Cuomo in the wake of the financial crisis, has been a thorn in the side of big banks, garnering a litany of high-profile settlements, including an $8.9 billion penalty on French bank BNP Paribas in 2014 for violating US sanctions.
But the agency's leadership is about to change for the second time in less than a year with the impending departure of acting superintendent Anthony Albanese. Albanese took over after the June exit by Benjamin Lawsky, who made a name for himself and the agency with a brass-knuckles approach to enforcement.
Albanese, who plans to leave no later than early 2016, worked closely under Lawsky, known as the "Sheriff of Wall Street", and carried on his mentor's robust approach to enforcement.
In the last two weeks alone, Albanese has unveiled $787 million in fines against Credit Agricole and $258 million in penalties on Deutsche Bank, both for violating US sanctions.
The DFS also announced it was fining Goldman Sachs $50 million for ignoring restrictions on employing a former Federal Reserve regulator in a case that underscored the revolving door-staffing tendencies of Wall Street and embarrassed both Goldman and the Fed.
- Tensions with Albany -
But Albanese and Cuomo have clashed since Lawsky left to start his own law firm, according to two people familiar with the matter.
Cuomo's assistant secretary of financial services, Brendan Fitzgerald, ordered the DFS to seek approval from Albany before issuing subpoenas, according to a source who spoke on the condition they not be identified. Albanese viewed the demand, which had not been imposed on Lawsky, as an effort to rein in the DFS, one of the people said.
A Cuomo spokeswoman said Albany's management of the DFS was standard.
"It is not unusual in a period of transition that the temporary head of an agency would work more closely with the second floor's deputy secretary overseeing that agency to ensure continuity and the same high standard of performance," said Cuomo spokeswoman Dani Lever.
As was widely reported, when the prior superintendent left, his deputy, Mr. Albanese, agreed to stay for a short time to assist with the transition, with the understanding that a permanent replacement would then be appointed."
Albanese sought to downplay his reported conflict with Cuomo, saying in an internal memo to the agency announcing his departure that he has "always had the utmost respect and admiration for the governor."
"My decision to depart in the near future is due solely to the fact that I received a new opportunity in the private sector; it is not related to the governor’s office," Albanese said.
"If I had not received this opportunity, I would have remained in the acting superintendent position."
Albanese's senior spokesman, Matt Anderson, also plans to exit the DFS around the same time as Albanese. Anderson, who had worked under Lawsky and had planned to join Lawsky in resigning, said he agreed to help Albanese for an "additional temporary period" during the transition.
Jacob Frenkel, a former US federal prosecutor now at the firm Shulman Rogers, said the DFS will probably remain a strong regulator after a new chief is appointed.
"The head of the regulatory agency sets enforcement priorities; nevertheless, the agency staff works the investigations and the investigations of the banks likely will continue," Frenkel said.
Sources said Albanese expects to complete a number of major probes before he leaves, including US sanctions cases at Societe Generale and UniCredit, foreign exchange manipulation cases at Deutsche Bank and alleged Treasury bond manipulation involving several large banks, including Credit Suisse, Barclays and Goldman Sachs.