The Independent Community Bankers of America (ICBA) “stormed” Washington, DC this past week as community bankers from across the country urged much needed regulatory reform. The ICBA pronounced the “excessive and unnecessary regulation is stifling their ability to meet the needs of local communities.”
As part of the ICBA 2018 Capital Summit, an event that represents approximately 5700 community banks, Comptroller of the Currency Joseph Otting showed up to share his thoughts on the current banking marketplace. During his remarks, Otting reportedly told ICBA members the Office of the Comptroller of the Currency (OCC) will soon be publishing its position on the Fintech Charter – a proposal that was initially supposed to streamline the process for Fintech’s to operate across the country without having to kiss the ring of each and every state regulator.
“We haven’t concluded on the position and we welcome people’s feedback. But I would say that if we did allow fintech to be regulated, they would be subject to the same rules and regulations as other banks.”
The Fintech Charter was initially pitched several Comptrollers back. Former Comptroller of the Currency, Thomas Curry, promoted the concept some time ago only to be criticized (and sued) by certain members of the House, the Senate, state regulators, and yes, the banking sector.
Curry was followed briefly by former acting Comptroller Keith Noreika who stated the obvious that the banking industry needs more competition – not less Fintech.the banking industry needs more competition - not less #FintechClick To Tweet
And why all of the cries that the sky would fall if Fintech firms, including non-bank lenders, had access to a Fintech charter? It all comes down to the future of banking, of course. Traditional finance is terrified of diminishing relevance. One possible future for traditional banks may be similar to what happened to Blockbuster Entertainment. And one of the ways to mitigate this pressure is to lobby at the federal level. That’s how DC works.
Face it. Banks, in general, are saddled with antiquated software systems and a portfolio of physical locations that are no longer needed. Fintech firms supply a fresh approach to delivering financial services – typically in a mobile first environment that appeals to the younger generation that sees no need to queue up at the local bank branch. These tech powered financial firms seek to disrupt traditional finance by providing better services, at a lower price point, to a wider population. This is something our public officials should be in support of – right?
As for community bankers, this is what the ICBA has to say about the Fintech Charter:
- ICBA continues to have serious concerns with the Office of the Comptroller of the Currency’s (OCC’s) proposal to issue special purpose national bank charters for financial technology (Fintech) companies that could be used to access the banking system and avoid state consumer protection laws. The OCC should have explicit statutory authority from Congress before the agency proceeds with the issuance of these charters. Any new federal charter should be subject to the same standards of safety, soundness, and fairness as other federal chartered institutions.
- ICBA is very concerned about the regulatory advantage currently enjoyed by online marketplace lenders and supports a regulatory framework for online lenders that is no less stringent than the framework that applies to community banks.
And since there is “at least one community bank in every congressional district,” don’t expect an update on the Fintech Charter to include anything transformational. The political headwinds are just too strong.