Fears of commercially owned banks are unfounded: OCC's Noreika

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WASHINGTON — Acting Comptroller of the Currency Keith Noreika on Thursday pushed back against concerns that his agency's proposed fintech charter will unduly benefit nonfinancial firms.

Since being appointed, Noreika has expressed an open mind about commercial firms entering the banking system, suggesting that the strict separation of banking and commerce in U.S. policy should be reexamined.

But on Thursday, he sought to challenge "the argument that a fintech charter may be a slippery slope toward the inappropriate mixing of banking and commerce." Noreika said such a concern "has been exaggerated with the intent of scuttling our fintech charter."

“The folks who suggest that the [Office of the Comptroller of the Currency] is considering granting charters to nonfinancial companies are wrong, and the more sophisticated ones know it,” said Noreika during an event at Georgetown Law School.

Noreika inherited the agency's work on developing a special limited-purpose fintech charter from former Comptroller Thomas Curry. Yet the acting comptroller still sounded non-committal on whether the agency will consider applications for the new charter under his leadership.

"As for our initiative to use our authority to charter nondepository fintech companies, that remains a work in progress," he said. He added that the agency will defend its authority to grant such charters "vigorously" but "we have not decided whether we will exercise that specific authority."

"Before we make that decision, we need to be certain that the companies expressing interest in becoming a national bank fully understand just what it means to be a bank," he said. "Many startup companies’ business models are intended to be an experiment that may only last a few years."

The proposed charter and Noreika's earlier comments about the mixing of banking and commerce have sparked some concerns about whether large technology companies like Amazon or Google could obtain banking powers, harking back to a pre-crisis debate spurred by Walmart's attempts to get an industrial loan company charter.

“Any type of hypothetical situation where a large commercial company would come in and want to own a bank I think will be politically controversial,” he said answering a question at the event.

However, he said it is the smaller “community fintech” companies that are more interested in getting a bank charter.

“A lot of people get worried... I don’t see a lot of the large players interested in these types of charters. I see a lot of smaller people interested in these charters,” said Noreika.

However, Noreika pointed to the ILC charter as well as other examples of commercial companies owning banks as evidence that the public should not be concerned.

“There are already dozens of examples where commercial companies are allowed to own banks at the state and federal levels without such abuse and harm — national credit card banks, state merchant processing banks, state-chartered ILCs,” said Noreika.

“We should not let fear prevent a constructive discussion of where commerce and banking coexist successfully,” he added.

Noreika said a benefit of a fintech charter is that it would shift many financial services providers under the regulatory blanket.

“We need to be certain that the companies expressing interest in becoming a national bank fully understand just what it means to be a bank,” said Noreika. “A national bank charter is a special thing, and the OCC will not undermine its value by granting charters to companies that are not ready to meet our admittedly high expectations.”

But he noted that companies have other avenues for chartering “long-established limited-purpose banks, such as trust banks, bankers’ banks, and other so-called CEBA credit card banks.”

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