OCC Takes Big Step Toward Creation of Fintech Charter

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WASHINGTON — After months of discussing the possible creation of a national fintech charter, the Office of the Comptroller of the Currency took a concrete step Tuesday toward establishing one.

In a new proposal, the agency detailed how it plans to invoke an obscure banking law to levy receivership powers over noninsured national financial institutions — which could include fintech companies — if they were to fail.

The plan "is relevant to any potential future fintech charter that could or may be issued by the OCC," said Comptroller of the Currency Thomas Curry in an appearance here at the inaugural Marketplace Lending Policy Summit. "Businesses aren't always a success. And you need the ability to wind down something if you're going to authorize its inception."

The proposal draws on decades-old legislative developments to demonstrate that the agency has the power to take a national, nonfederally insured bank into receivership.

According to the OCC, the Federal Deposit Insurance Corp. lost the power to take over noninsured banks with the passage of the Financial Institutions Reform, Recovery and Enforcement Act, which was enacted in 1989 in response to the savings and loan crisis.

For now, the proposal would only apply to 52 trust banks. The last time the OCC had to appoint a receiver for such an institution was during the 1930s.

The proposal instead is clearly laying the groundwork for a future fintech charter. With receivership powers, the OCC could begin regulating nondepository financial institutions without [the] having to obtain a green light from the FDIC, which must approve deposit insurance applications.

"They need some kind of wind-me-up receivership powers if they charter a fintech company," said Ronald Glancz, who chairs the financial services group at Venable. "We now have a mechanism to deal with a fintech company that fails."

Tucked into the plan is a clear reference to the agency's recent overtures to the fintech industry.

"As part of the agency's initiative on responsible innovation in the federal banking system," the proposal states, "the OCC is considering how best to implement a regulatory framework that is receptive to responsible innovation, such as advances in financial technology."

In its plan, the OCC also asked for public input on "the utility of the receivership structure in the proposed rule for receivership of such a special purpose bank."

Yet questions about the process remain. For one, it is unclear where the OCC would get funding to oversee a liquidation of a failing financial institution. The FDIC relies on its own Deposit Insurance Fund, and beyond that can draw on the Treasury Department in the case of emergencies. But the OCC has nothing comparable.

"What happens if there's not enough money even to wind it down?" asked Glancz.

In his speech, Curry also listed other obstacles the OCC would have to resolve in order to create what he called a "framework that encourages" fintech companies, which he said would be released in the fall. If the OCC established a fintech charter, it would resolve one big issue, Curry said, namely: which agency should regulate them?

"To some extent, the conversation about whether there should be a national substantive law or a federal license or charter for marketplace lenders and fintech firms is part of answering the question of 'who' should regulate the activity," Curry said. "If a firm merited a federal bank charter, the question would be resolved, as it would be squarely under the primary federal supervision of the OCC."

Curry raised three other main policy issues: whether fintech companies are in compliance with existing laws and regulations; whether the current regulatory framework was "adequate" for such firms; and whether new regulations and laws should be implemented to address fintech.

But he also stressed the agency would not go it alone. "We recognize that regulation is as interconnected as the financial industry itself," Curry said. "In applying the framework, we will collaborate with other regulators."

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