Office of the Comptroller of the Currency may Offer National Charters for Digital Banks

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Thomas Curry, Comptroller of the Currency, Officially Announces Bank Charters for Fintech

Thomas CurryIn a speech delivered at Georgetown University today, Thomas Curry, Comptroller of the Currency, announced the creation of special purpose national bank charters for Fintech companies. The announcement was driven by an ongoing discussion by the Office of the Comptroller of the Currency (OCC) regarding emerging Fintech firms that are poised to challenge established financial service norms. This past October, Curry announced the creation of an Innovation Office to help keep abreast of the rapid change.

Curry pointed to the fact that innovative Fintech firms had “ballooned” to more than 4000 in the UK and US with global investment jumping to $24 billion in the last few years.  This rapid growth is forcing regulators and traditional finance firms to revisit established operations and practices. Today an increasing portion of financial services are completed online or on a smartphone. The banking industry is now compelled to question the relevance of a bank branch on every other corner.

Regarding the creation of a Fintech Charter , Curry stated;

“Our next step, which I am announcing here today, is that the OCC will move forward with chartering financial technology companies that offer bank products and services and meet our high standards and chartering requirements. We have published a paper today discussing several important issues associated with the approval of a national bank charter, and we are seeking stakeholder comment to help inform our path forward. Your comments will help us ensure that the agency’s chartering decisions promote the safety and soundness of the federal banking system, increase financial inclusion, and protect consumers from abuse. I hope the professors and legal minds studying here will take the opportunity to read the paper and provide your thoughts.”

These new special purpose charters have been deemed in the national interest of supporting responsible innovation. Providing a national charter for Fintech firms was said to promote economic growth while recognizing that Fintech is the future of banking.

Additionally, creating a Fintech banking charter will allow the OCC to better engage, and learn, from disruptive financial tech.

While there is no requirement for Fintech firms to pursue a charter it is viewed as an option, depending on the services the firm is pursuing.

Curry also addressed several concerns: consumer protection, financial inclusion, regulatory fairness and supervisory “rigor”.

Curry said that consumers and businesses should have access to products that better suit their needs. The OCC has the ability to “impose” certain requirements for entities seeking a Fintech banking charter.

Pertaining to the regulatory rigor, Curry stated;

“The worry here is that by providing a special purpose national bank charter we are somehow tipping the balance of competition by allowing special purpose banks to compete with full-service banks without assuming any of the responsibility. But, the reality today is that the 4,000 fintech companies out there are already competing with national and state banks, without regard to any of the national bank responsibilities and under a patchwork of supervision.”

Money International Global CurrencyThe initiative, while not unexpected, comes at a time of dramatic change in Washington, DC. One administration is leaving and the other is quickly assuming the leadership of the massive federal government – including the OCC. Leadership at the agency may continue in the same or similar path but this remains unknown.

Simultaneously it is widely believed the US is falling behind in modernizing regulations that can boost Fintech innovation. Leading financial centers like London and Singapore have pushed ahead while the US has remained mired in a fragmented regulatory environment ill-suited to adapting in an agile and more competitive fashion.

While the Charter can be a positive move for Fintech firms seeking to challenge traditional finance head on, the devil will be in the details – and how it is actually enforced.

The speech is embedded below.

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