Joseph Otting, a former banker and CEO of OneWest Bank, was approved by the Senate in a party line vote last week to take over the helm at the Office of the Comptroller of the Currency (OCC). As Comptroller, Otting will be stepping into an office that has enjoyed and endured quite a bit of scrutiny and debate. Otting will take over from Keith Noreika, who was acting Comptroller from spring of this year following the departure of Thomas Curry who’s tenure expired after a tumultuous reign as the top banking regulator.
Really, it was Curry who rattled the cage of establishment finance by poking the hornets nest of politicians and banking execs when he proposed the OCC Fintech Charter. The potential for a new on-ramp for Fintech firms to operate around the country without asking for permission from each and every state shook old finance to the core. With battle hardened bank lobbyists ready to go, both Democrats and Republicans criticized the daring proposal that threatened to increase competition against beleaguered banks. The New York Department of Financial Services (DFS) sued the OCC, as did the Conference of State Banking Supervisors, simply because the OCC had the temerity to want to regulate Fintech firms.
Time for Change
Brian Korn, a prominent attorney in the Fintech space, described the OCC Fintech Charter earlier this year as a “novel attempt by a federal regulator to adjust for changing times.” We asked Korn for his thoughts about the incoming Comptroller;
“Comptroller Otting faces a booming economy but a banking sector that has undergone significant consolidation and pricing competition from new technologies that are likely to make physical branches obsolete,” said Korn. “He will face a critical crossroads in dealing with Fintech firms- will he continue down the rulemaking path of his predecessors in allowing special purpose Fintech charters? Former Comptroller Curry and Acting Comptroller Noreika both favored exploring Fintech charters to bring Fintech within the control of regulators.”
Korn noted that state regulators are prepared to fight to save their brick and mortar turf;
“State banking regulators have vowed to fight these plans, as they see it as an improper endorsement over what has been characterized as uncontrolled lending tactics that will ultimately hurt consumers. Local regulation is best, they believe. And few Fintech firms have the infrastructure in place to comply with traditional bank regulatory systems.”
If Otting decides to stand up to the banking hyperbole it won’t be an easy task. Noreika’s parting shot was a speech explaining how competition is good for banking (as it is for most industries). The response was as expected. Fearing big tech, like Amazon and Apple, the Independent Community Bankers of America called it a bad dream.
All of this begs the question: who will gain if Fintech is allowed to compete with banks?
It is not just the Fintech firms, or big tech firms, who will gain. It is the consumer who will gain from better services at a lower cost. Isn’t that part of the OCC vision to promote a vibrant and diverse banking system that benefits consumers, communities, businesses, and the U.S. economy?