The incoming Chair of the House Committee on Financial Services, Patrick McHenry, has issued a statement that he plans to add Financial Services Innovation Offices (FSIOs) back on the agenda.
As the Republicans will take over the House in January after gaining the majority in the mid-terms, all of the Chairs of the House Committees will be led by Republicans. McHenry, a long-time supporter of innovation in financial services, has been the ranking member of the Committee while the Democrats controlled the House. Today, he announced that he is bringing back the Financial Services Innovation Act – legislation he proposed in both 2019 and 2016.
Chairman-elect McHenry stated:
“It’s critical for our regulatory process to work with financial innovation instead of against it. I’m reintroducing the Financial Services Innovation Act to modernize and streamline how innovators interact with regulators to build a more inclusive financial system. My legislation will help financial institutions and entrepreneurs get innovative products and services to market sooner, while maintaining critical consumer protection safeguards. This follows the successful model of North Carolina’s regulatory sandbox program to strike the appropriate balance to foster responsible innovation. Committee Republicans will continue to work toward an up-to-date regulatory framework that gives Fintech firms clear rules of the road for success.”
HR 9556 requires federal regulators to create Financial Services Innovation Offices (FSIOs) within their agencies. These mandated entities seek to foster innovation in financial services. At the same time, companies may apply for an “enforceable compliance agreement” with the FSIOs that could allow them to provide a product or service under an alternative compliance plan, which may waive or modify regulation. The FSIOs are similar to the Fintech Sandbox concept that the UK pioneered. As financial services are one of the most regulated industries in the world, regulation can stomp out innovation before it has a chance to prove itself.
The bill aims to ensure regulators reduce the barrier to innovation, and keep pace with change while maintaining safeguards.