The federal insurer of bank deposits is moving forward on its proposed “office of innovation,” but operation is still a few months away, the chairman of the agency’s board said Thursday.
In a press conference following presentation of year-end 2018 financial statistics for banks, Federal Deposit Insurance Corp. (FDIC) Chairman Jelena McWilliams told reporters that the agency hopes the new office – the establishment of which she announced in October – will be “operational in the next few months.”
She indicated that the FDIC is still setting up the office, including naming someone to run it (which she also indicated is an initial step in making the office operational). But she also said that the individual overseeing the office, and other staff, will be detailed from existing departments within the agency, at least initially. She suggested that approach is being taken so that staff can learn “a new skill set of thinking outside of the box and thinking of innovation” at a regulatory agency, and about setting up the regulatory framework going forward.
“So, we’ll have staff from the consumer protection division, staff supervisory division, staff from (the) division of insurance and research detailed to this office and probably a six-month detail,” she said.
“And then as they learn and get the office started with the new head of the office of innovation, (they can) move forward and go back to their divisions and spread the knowledge that they gained in that process,” she said.
(In this brief video, FDIC Chairman Jelena McWilliams discusses how and when the new innovation office will be set up and staffed.)
In previous speeches and remarks, McWilliams has characterized the innovation office as a unit within the agency that will help bankers “stay on the technological forefront.”
However, in other comments Thursday, she expanded on that view, adding that the innovation office is a way for the agency to think about how banks can use technology and then work with the FDIC on developing product offerings that “would be in line with the new technologies as they emerge.”
“And a part of this is that we have seen in the last decade or so that a lot of the innovation has taken place outside of the banks,” she said, adding that financial technology companies (fintechs) are more agile and able to move and develop products more quickly than banks (since, she asserted, innovation “takes a long time”). She said much of the innovative banking activity is leaving the “banking channel” through the fintechs.
“The idea for the office of innovation and technological development would be to encourage banks to bring some of that activity inside by innovating in a way that’s safe and sound, ensures consumer protection, and enables banks to both utilize fintechs and compare with fintechs and be able to offer products more quickly to the marketplace,” McWilliams said.