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No “if” about fintech charter, says Curry

Drafting of licensing manual proceeds amid concerns

The Comptroller's Office plans to go ahead with implementation of its fintech charter proposal, said national banking regulator Thomas Curry in a speech at the recent LendIt USA conference. The Comptroller's Office plans to go ahead with implementation of its fintech charter proposal, said national banking regulator Thomas Curry in a speech at the recent LendIt USA conference.

Comptroller of the Currency Thomas Curry told a New York City fintech audience that his agency is moving ahead with drafting a fintech section for its licensing manual even as it continues to evaluate the 100+ responses to its proposal for a national fintech charter.

Speaking at LendIt USA, Curry said, “we will be issuing charters to fintech companies engaged in the business of banking because it is good for consumers, businesses, and the federal banking system. It also appears to resonate with some of you. The OCC is working to publish a supplement to our existing Licensing Manual that will clarify our approach to evaluating applications from fintech companies.”

During a separate Q&A session with conference attendees Curry said that OCC did not believe that all fintech players had to be fintech banks. He said that national bank standards are high standards.

“There is opportunity for choice among fintech firms,” said Curry.

OCC to charge ahead on charters

The definitive way Curry described moving forward with the charter was of interest, given that some organizations, such as the Conference of State Bank Supervisors, have questioned the agency’s ability to grant such charters.

“To be clear,” said Curry, “the National Bank Act does give the OCC the legal authority to grant national bank charters to companies engaged in the business of banking. That authority includes granting charters to companies that limit their business models to certain aspects of banking, and it is not circumscribed just because a company delivers banking services in new ways with innovative technology.”

Added Curry: “Neither does the law require that a bank take deposits to qualify for a national bank charter. The OCC has been issuing national charters to banks with limited purposes for decades—both insured and uninsured—and they are an important part of the federal banking system.”

While his speech reiterated the importance of financial inclusion as part of the mission of any chartered institution, he acknowledged in the Q&A that “a fintech is different from a traditional brick-and-mortar bank.” He said, overall, that fintech companies’ charter applications would be evaluated on a case-by-case basis.

Risk management ranks high

In the speech, Curry made the point that attention to risk management was an expectation of any company that successfully obtains a charter.

“We see too many stories of bright executives and promising companies, with industry-disrupting ideas, failing to establish strong risk cultures and effective compliance programs,” said Curry. “For that reason, I urge you, as leaders and visionaries, to develop and nurture a company culture of responsibility that insists on consumer protections and sound controls and adopts a long-term strategy for growth.”

In the Q&A he noted that issues of diversification of risk would be expected to be addressed in an applicant’s proposed business plan.

The overall LendIt USA audience comprised 29% fintech firms, 26% investors, 25% service providers, and 18% banks, according to a conference document.

Curry addressed multiple misconceptions—as he termed them—about fintech charters in his speech. One was “the idea that offering federal charters to fintech companies somehow mixes banking and commerce.”

“The OCC understands the importance of maintaining the longstanding separation of banking and commerce,” Curry said. “Comingling banking and commerce would introduce risks associated with non-banking related commercial activities, interfere with the allocation of credit, and foster anti-competitive effects and undesirable concentrations of economic power. Proposals that would mix banking and commerce are inconsistent with the OCC’s chartering standards and would not be approved.”

One concern of potential fintech charter applicants has been that the Bank Holding Company Act would pull all other activities of a parent organization under the authority of the Federal Reserve. (Theoretically, imagine a Amazon obtaining a fintech charter and having its huge enterprise then become a Fed-regulated entity.)

Asked about this, Curry said OCC staff was in communication with Fed staff as well as with staff at the Consumer Financial Protection Bureau and at the U.K.’s Prudential Regulation Authority.

Read Comptroller Curry’s speech

View video of speech

View video of Q&A session

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