Otting touts federal charter for fintechs, FBO branches

The nation’s top banking regulator pitched the federal charter to foreign banking organizations (FBOs) that would set up branches in the U.S. and promoted his agency’s recent creation of a path to a federal fintech charter during remarks given Wednesday in Tokyo.

Comptroller of the Currency Joseph Otting

Speaking at an event titled “Special Seminar on International Finance,” Joseph Otting, head of the Office of the Comptroller of the Currency (OCC), recounted his agency’s announcement in July that the OCC would begin accepting applications for national bank charters from nondepository fintech (financial technology) companies engaged in the business of banking. An OCC charter would allow the company to operate across all 50 states and work under a single regulatory framework, with OCC as its primary prudential regulator.

Otting described the national fintech charter as a way to facilitate more choices for consumers and businesses while creating “greater opportunity for companies that want to provide banking services in America.” While noting there are other charter options available – state banking charters, business licenses, and partnerships with other financial institutions – Otting said the option for a national bank charter “allows these companies to choose the best business model and regulatory structure for their business and strategic goals.” He also said giving fintech companies a path to a national bank charter “can make the federal banking system stronger by promoting economic growth and opportunity, modernization and innovation, and competition.”

The Comptroller of the Currency also highlighted the OCC’s role in the licensing and supervision of foreign banking organization (FBO) branches and agencies. Otting noted, for example, that for a large banking company, operating at the state level “can mean licensing in five to 10 states, resulting in five to 10 different entities and regulators. That adds complexity and operating costs and, in my view as a banker, may not be the most efficient approach to conducting banking in the United States.”

Otting said the OCC “strongly supports” the dual banking system and that the business decision of whether to operate under a state or federal license is banks’ to make. He underscored, however, that the OCC is “well positioned and qualified to provide effective and efficient supervision of federal branches of foreign banks operating in the United States because of its experience supervising the largest, most internationally active banks in the country.”

He added, “The OCC has a long history of supervising federal branches of foreign banks operating in the country. In many cases, there are supervisory efficiencies gained by consolidating the supervision of branches of foreign banks with the supervision of the national bank subsidiary of the parent company, which the OCC already supervises. The result is more complete, more efficient, and, importantly, more thorough regulation of the institution.”

In his speech Wednesday – which appears to be the first for which the OCC has released a text since Otting became the comptroller (excluding congressional testimony) – Otting touted the overall strength of the U.S. banking industry and praised the supervisory reforms provided in the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S. 2155).

He recapped the four top risks for the industry identified by the agency’s Semiannual Risk Perspective report issued in June; reminded of the current challenge banks face getting ready to implement the new credit-loss accounting standard; and noted his agency’s work to address the need for short-term, small-dollar loans.

Remarks by Comptroller of the Currency Joseph Otting at Special Seminar on International Finance, Tokyo (Nov. 14, 2018)