Before Comptroller of the Currency, Tom Curry left his post in May of 2017, he proposed a new type of specialty bank charter designed specifically for non-banking companies who wanted to play a role in offering financial services, but did not need a full fledge banking charter for their sometimes narrowly focused service offering. A fintech banking charter that was proposed that offered a scaled down version, but still required structure, strong liquidity management and oversight by the OCC. Talk of this charter type died down until recently. As reported in Bobs Guide:
The idea of a fintech charter is divisive, and has been brought up on numerous occasions. Since Curry first mentioned it, it’s gone through a few iterations, and recently been on hold amid legal challenges from the state regulators who directly license fintech firms, and who have argued that the Office of the Comptroller of the Currency (OCC) would be exceeding its mandate by attempting to force rules on the sector. That issue comes to the nub of the issue.
“We’ve got a very jumbled regulatory system,” says Gary Stern, former head of the Federal Reserve Bank of Minneapolis. “Look at the landscape, the system. It’s not a failure or anything like that, but it’s not always clear who’s in charge of what.”
While some states believe that the fintech charter steps on their rights, some have voiced the opinion that a segment of fintech organizations are getting away with practicing banking without a license and need to be reined in. This includes the specter of Amazon getting into banking and Pay Pal’s outreach to the underbanked with prepaid services:
Many market participants might well baulk at the idea of a federal regulator empowered with a fintech charter, arguing the very nature of technological innovation should be allowed to develop unimpeded. And while there’s credence to that argument, the flipside of the coin suggests regulations can be welcomed. Just ask CFTC chairman, Christopher Giancarlo. Speaking last year on the importance of supporting market liquidity and capital requirements: “The time has come for regulators on both sides of the Atlantic to recalibrate bank capital requirements to better balance systemic risk concerns with healthy economic growth and prosperity.”
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group