New York’s banking regulator blocked consulting firm Promontory Financial Group from taking some assignments with banks the state oversees, setting up a potential showdown in court between the two sides.

The New York Department of Financial Services said Promontory, one of the financial industry's most prominent consultants, was too close to its client, Standard Chartered. The state regulators alleged the firm watered down its compliance reports on the UK bank. As a result, the department said it would indefinitely cut off Promontory's access to confidential department information it needs for some assignments, thus suspending the firm from some future consulting work.