New York’s banking and insurance departments will be merged, putting into effect a proposal Gov. Andrew Cuomo made before taking office in January.

Andrew Cuomo

The two state agencies will be merged into the new Department of Financial Services, streamlining that will save money and promote better investigations of financial fraud, according to Cuomo, a former attorney general in New York.

The merger, which includes a requirement that separate insurance and banking divisions be formed, is part of the governor’s $132.5 billion budget approved by state lawmakers earlier this week and awaiting Cuomo’s signature.

The new entity will regulate any financial product being offered in New York, as well as any service or entity that is not regulated by another state agency.

The state’s banking regulators now oversee all state-chartered banks and the state insurance department has jurisdiction over all insurance companies and products being sold in the state.

Gary Henning, Northeast region vice president of the American Insurance Association (AIA), representing the property-casualty industry, said the group is “pleased” with the merger.

“AIA strongly advocated for insurers to remain regulated by a separate insurance division and this legislation accomplishes that goal by mandating separate banking and insurance divisions within the Department of Financial Services,” Henning said.

He said the creation of a Modernization Working Group, consisting of policymakers and stakeholders, to study how to best make financial services regulation more effective and efficient is another benefit of the plan.

“AIA looks forward to being an integral part of this important discussion on streamlining regulation and strengthening the property-casualty marketplace in New York,” Henning said in a statement.

State officials have said they expect the new, combined office to open early October.