The Office of the Comptroller of the Currency is still accepting comments on the proposed Fintech Charter for financial firms looking to operate with a federal charter. The deadline was initially set for January 15th but one report says the OCC has pushed the date back to January 17th to accommodate the long weekend.
The Fintech Charter has the potential to be a powerful tool for aspiring innovative financial firms that seek to compete on the national level. But opposition is mounting from traditional financial firms that have become comfortable with the sizeable regulatory moat that has blocked most competition. While traditional finance does not like paying the compliance toll, the thought of having more competition from agile Fintech firms — unencumbered by legacy technology and a culture averse to change — draws shivers up the spines of banks. In a touch of irony, stiff regulatory costs have become more appealing than robust competition.
Last week, two US Senators chastised the OCC for their incredulous impunity in thinking outside of the regulatory box. While packaging their concern in the guise of investor protection one hears the footsteps of bank lobbyists or state regulators leaving the Hart Senate office building.
The OCC truly hit the Fintech radar when the agency published a report entitled, “Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective.” The OCC was ostensibly seeking ways to support Fintech innovation while gauging risk. Fair enough.
In October, the OCC published their next document outlining “Recommendations and Decisions for Implementing a Responsible Innovation Framework”. One of the suggestions was to create an office of Innovation with physical locations in various locations across the country. Initial offices would be in NYC and SF – the hotbeds of US Fintech firms.
In December, the OCC published a document outlining their thoughts on creating a new national charter for innovative financial firms. The paper entitled, “Exploring Special Purpose National Bank Charters for Fintech Companies”, documented the questions the OCC was exploring in its pursuit of crafting a Fintech charter. The Fintech Charter would be similar in pre-empting state oversight similar to the national bank charter – a debate that worked its way up to the Supreme Court. It is this consultation paper that is out for comment now.
In essence, the OCC is seeking to better understand the benefits and risks in drawing up a Fintech charter. The final decision remains in limbo. But the OCC appears to understand it is better to be engaged and sitting at the innovation table then observing from afar.
So is a Fintech Charter good or bad for Fintech firms? IS the OCC the correct agency to lead this charge? Excellent questions as the devil remains in the details.
Fitch Ratings posited that a Fintech Charter could harm agility and add cost to innovators. Moody’s took the other side of the argument stating a Fintech charter may aid marketplace lending platforms. What is certain is that all financial services suffer under the weight of a tortuous and byzantine labyrinth of regulatory agencies. There is no single bureau or commission where a financial firm must check in. There are up to a dozen (or so) financial regulatory agencies, depending on how you look at it. Inefficient? Yes. Good for consumers? No.
On January 20th the Obama administration will be replaced by the President Trump’s team. Appointed by the President, the Comptroller of the Currency serves a 5-year term and may be removed at any time by the President. The term of the current Comptroller, Thomas J. Curry, expires on April 1, 2017 – a few weeks after the inauguration. While Curry may be left to finish out his term the next Comptroller may have different priorities. As the United States endures an internecine battle of regulatory philosophies, countries like Singapore and the UK look to buttress their prominence in financial innovation setting the pace for the rest of the world. The US remains the largest single financial market in the world, but this dominance is something the country should never take for granted. As the Marketplace Lending Association appropriately requested of our elected officials;
“Please ensure that America is a place where Fintech can flourish and the federal government is a partner, rather than an obstacle.”