The Office of the Comptroller of the Currency (OCC) has opened a consultation on a proposed Innovation Pilot Program. The OCC charters, regulates, and supervises national banks and federal savings associations. The OCC has also been a proponent of a Fintech Charter but as of today, not a single such charter has been approved.
According to the OCC, the program would be voluntary and designed to provide eligible entities with regulatory input early in the testing of innovative activities that could present significant opportunities or benefits to consumers, businesses, financial institutions, and communities.
The program is said to add value through “constructive, proactive supervision and to serve as a valuable resource to industry stakeholders.”
“Supporting a financial system that innovates responsibly is central to the mission of the OCC,” said Comptroller of the Currency Joseph M. Otting. “As the prudential regulator of the U.S. federal banking system, the OCC has been a leading voice among regulators on the importance of encouraging innovation that promotes safe and sound bank operations, treats customers fairly, and provides fair access to financial services. This proposed program is an important step as we look to the future of supervision and the evolution of the U.S. banking system.”
While the digitization of finance is inevitable, many regulatory hurdles impede Fintech growth. Robust Fintech ecosystems have emerged in jurisdictions like the UK and Hong Kong where regulators and policymakers have played an important role in supporting Fintech innovation. A good example is Hong Kong where regulators took less than a year to post a consultation on digital only challenger banks to approving their first batch of innovative banks.
Some industry participants fear innovative young firms will migrate to more forward-thinking jurisdictions.
The OCC states that entities eligible for the proposed program would be OCC-supervised financial institutions, including those engaging a third party to offer the innovative product, service, or process. Entities may propose a pilot individually or as a collaborative effort such as a consortium or utility.
Comments on the proposed program should be sent to pilotprogram@occ.treas.gov by June 14, 2019.