Let the turf wars begin. Predicting “regulatory confusion and uncertainty” from a federal proposal that would enable fintech companies to become special purpose banks, New York State’s financial regulator has blasted the plan from the Office of the Comptroller of the Currency. The state agency’s not alone: Already, Democratic senators have opposed the OCC proposal, with community bankers also joining the chorus of protest.
In a letter dated Jan. 17, Maria Vullo, superintendent of the New York State Department of Financial Services, questioned why the OCC wants to go through with its chartering plan given that it has not identified any deficiencies at the state level that would justify those charters. She also tossed aside the argument that such charters would present a robust response to increasing technological innovation the payment and finance worlds, writing that “technology is not new to financial services” and adding that states already regulate nonbank financial services companies.
The OCC has said that its plan would help ensure that fintech companies operate in a “safe and sound manner,” promote “consistency in the application of law and regulation,” and make the “federal banking system stronger.” Fintech companies seeking charters would have to fulfill multiple requirements under the proposal, including performing core banking services.
In another letter, the Independent Community Bankers of America said that while it backs a “new Office of Innovation that could potentially help those community banks that are interested in partnering with financial technology or fintech companies,” the OCC’s charter idea lacks details about what supervision and regulations would apply to chartered institutions and their parent companies. Nor has the federal agency “adequately explained” who would be eligible for charters, the letter continued. Without such details, the trade group will not support the OCC plan.
The community bank opposition follows criticism of the OCC plan earlier this month from U.S. Sens. Sherrod Brown (D-Ohio) and Jeff Merkley (D-Ore.), who said a new federal charter governing the industry “could weaken consumer protections, limit competition and threaten financial stability.”
In its own letter to the OCC, the Center for Financial Services Innovation said it “supports the OCC in using your authority to provide special-purpose national bank charters to financial service providers who can meet your standards for chartering. We believe a specialized charter for non-depository, tech-driven companies could accelerate positive innovations that have the potential to improve financial health. We believe the benefits outweigh the risks—but only if the OCC creates the right guidelines and processes for designing and awarding charters and supervising the resulting charter holders.”
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