Quick turnaround: Fintech applications accepted by bank regulator just 4 hours after Treasury report issued

Barely four hours after a Treasury report was issued calling for a national charter for financial technology (fintech) companies, the regulator of national banks Tuesday announced it was accepting applications for charters for the non-bank financials.

In a release, the Office of the Comptroller of the Currency (OCC) said it will begin accepting applications for national bank charters from the “nondepository financial technology” companies (fintechs) engaged in “the business of banking.”

The agency said its decision to begin accepting the charters is “consistent with bi-partisan government efforts at federal and state levels to promote economic opportunity and support innovation that can improve financial services to consumers, businesses, and communities.”

The agency said its decision is documented in a policy statement and supplement to the OCC’s Comptroller’s Licensing Manual, both published Tuesday.

Tuesday morning, the Treasury Department issued its fourth and final report in a series that responds to President Donald Trump’s 2017 executive order focusing on regulatory core principles. The 222-page report – offers recommendations to “support nonbank financial institutions, embrace financial technology (fintech), and foster innovation.”

The report (issued at 10 a.m. ET) had urged OCC “to move forward on ‘prudent and carefully considered’ special-purpose bank charter applications.” At 2 p.m. ET, the OCC issued its press release.

The Tuesday afternoon announcement by the OCC outlined five points the agency will consider in evaluating fintech applications, including a final point of the agency’s resolve:

  • Every application will be evaluated on its unique facts and circumstances.
  • Fintech companies that apply and qualify for, and receive, special purpose national bank charters will be supervised like similarly situated national banks, to include capital, liquidity, and financial inclusion commitments as appropriate. Fintech companies will be expected to submit an acceptable contingency plan to address significant financial stress that could threaten the viability of the bank. The plan would outline strategies for restoring the bank’s financial strength and options for selling, merging, or liquidating the bank in the event the recovery strategies are not effective.
  • The expectations for promoting financial inclusion will depend on the company’s business model and the types of planned products, services, and activities.
  • New fintech companies that become special purpose national banks will be subject to heightened supervision initially, similar to other de novo banks.
  • The OCC has the authority, expertise, processes, procedures, and resources necessary to supervise fintech companies that become national banks and to unwind a fintech company that becomes a national bank in the event that it fails.

The agency pointed out that it also possesses “statutory authority, regulations, and policies” that include companies engaging engage “in one of the core banking functions” — paying checks, lending money, or taking deposits.

However, OCC noted, that authority does not require the bank to take deposits within the meaning of the Federal Deposit Insurance Act (FDIA) and therefore would not require insurance from the Federal Deposit Insurance Corp. (FDIC).

The agency said its decision to move forward on accepting the fintech charter applications followed “extensive outreach with many stakeholders over a two-year period,” including reviewing public comments solicited in 2016 and 2017.

“Qualifying fintech companies also may apply for federal charters under the OCC’s authority to charter full-service national banks and other special purpose banks, such as trust banks, banker’s banks, and credit card banks,” the OCC said.

Comptroller Joseph Otting, in the release, stated that providing a path for fintech companies to become national banks can make the federal banking system stronger by promoting economic growth and opportunity, modernization and innovation, and competition. “It also provides consumers greater choice, can promote financial inclusion, and creates a more level playing field for financial services competition,” he said.

OCC Policy Statement

Comptroller’s Licensing Manual Supplement: Considering Charter Applications From Financial Technology Companies

Treasury report gives nod to fintech charter