New York has banned Promontory Financial Group from most work with New York state-licensed banks that are suspected of wrongdoing, the New York Times reports.
Promontory, a well known bank consultant, is responsible for helping many of the state’s biggest banks through regulatory issues as an independent consultant. But the state’s Department of Financial Services decided to suspend the firm indefinitely for allegedly hiding some bank violations that it should have exposed.
In a 15-page report, the regulator ripped apart Promontory’s work for for the British bank Standard Chartered, calling out biases. Standard Charter was suspected of transferring billions through its New York office to countries sanctioned by the U.S. Internal emails revealed that Standard Charter pressured Promontory to sponge its record, cleaning up language and cutting out red flags. Promontory’s “independent” assessment of the bank was used by authorities when punishing Standard Charter in 2012. Writes the New York Times of one example:
The bank’s lawyers asked Promontory to remove a portion of an interim report because it referred to conduct the regulators were not yet aware of and may “draw questions which we’re not yet prepared to answer.” A Promontory employee concurred, saying “let’s do it. We’ve come this far, we might as well go for the three pointer.”
During testimony, Promontory employees “lacked credibility,” the Department of Financial Services says. Comments such as making language “more sterile” meant to make it “factually accurate,” the Promontory employees claimed. Employees say they would have liked more information and guidelines on how they should interact with the bank. The team isn’t being charged with a legal violation, but “exhibited a lack of independent judgement” a consultant needs. The regulator is relying on a 19th century law that allows it to withhold necessary documents from consultants that will effectively blacklist the firm from doing business.
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