Bank regulator defends national fintech charter plan

The acting chief of the Office of the Comptroller of the Currency (OCC) on Wednesday defended his agency’s plan to issue national banking charters to financial technology companies that offer banking services.

Acting Comptroller Keith Noreika said in a Wednesday speech that the OCC should be able to charter so-called “fintech” companies that offer banking services, such as loan underwriting and money transfers, and bring them under federal regulation. The Conference of State Bank Supervisors and New York Department of Financial Services are suing the OCC over the plan.

“Companies that offer banking products and services should be allowed to apply for national bank charters so that they can pursue their businesses on a national scale if they choose, and if they meet the criteria and standards for doing so,” Noreika said.

“If you provide banking products and services, acting like a bank, you ought to be regulated and supervised like a bank. It is only fair, but today, that is not happening.”

Fintech companies, which aim to offer cheaper, safer and more accessible banking services, have exploded in popularity. The industry includes smartphone apps, which allow users to send and receive money the same way they’d send a text, as well as online lending companies that specialize in smaller personal and business loans.

Regulating fintech companies has been complicated by their positioning across several regulatory areas. A lack of formal bank charters has meant that such firms must seek state-by-state approval and navigate what they consider a difficult intersection of federal and state banking, lending and technology laws.

State banking regulators have expressed concerns that national charters for fintech companies could hinder state banking regulation and expose customers to risk. Noreika countered that a federal charter system would help make sure fintech companies were well regulated.

“The OCC’s approach to innovation has the virtue of bringing technology oriented
financial companies that provide banking services out of the shadows,” Noreika said, “and into a well established supervisory and regulatory regime that will promote their safety and soundness and allow the federal banking system and its customers to benefit from their inclusion.”