OCC weighing major changes to its technology framework

Register now

WASHINGTON — The Office of the Comptroller of the Currency is considering major changes to how it regulates the way banks develop and use technology, the agency announced Thursday.

With the release of an advance notice of proposed rulemaking, the OCC said it was planning to revisit the rules governing bank technology to ensure that its regulation is “sufficiently flexible and clear in light of the technological advances that have transformed the financial industry over the past two decades,” according to a press release.

The notice asks just over a dozen questions on a wide range of technologies as well as regulatory processes. The agency said it was seeking input on how it could improve the way it regulates activities related to cryptocurrency, distributed ledger technology, artificial intelligence, machine learning and more.

On artificial intelligence, for instance, the OCC asked stakeholders to articulate how “AI techniques, including machine learning," are "used or potentially used in activities related to banking.” The national bank regulator also asked the public if there were “ways the banking industry could be, but is not, using AI because of issues such as regulatory complexity, lack of transparency, audit and audit trail complexities, or other regulatory barriers.”

The OCC’s notice of proposed rulemaking asks just over a dozen questions on a wide range of technologies as well as regulatory processes.
The OCC’s notice of proposed rulemaking asks just over a dozen questions on a wide range of technologies as well as regulatory processes.

The filing comes less than a week after acting Comptroller Brian Brooks took the helm of the OCC. Brooks has been seen by some as bringing a heightened focus on fintech issues, after his experience as chief legal officer at the cryptocurrency exchange Coinbase.

“Innovation is a personal passion of mine, and the OCC can build on its foundation of innovation to provide banks and thrifts the regulatory certainty, the flexible framework, and oversight that allows them to evolve and capitalize on technology and innovation to deliver better products and services, to operate more efficiently, and to reduce risk in the system,” Brooks said in an introductory statement last week.

In general, the notice of proposed rulemaking appears aimed at having commenters highlight areas or services that are not “sufficiently addressed” in existing regulatory framework. The agency also asked banks to share information about new regulatory technology tools — or regtech — that they “use to comply with regulations and supervisory expectations.”

More broadly, the OCC asked the public for input on technology challenges specific to small banks, as well as any other issues the agency should consider in “light of changes in the banking system that have occurred in response to the COVID-19 pandemic, such as social distancing.”

Thursday’s notice was not the only regulatory filing to come out of the OCC. In a separate notice of proposed rulemaking, the agency said it was continuing its effort to “modernize its rules and remove unnecessary requirements to relieve banks of unnecessary burden.”

The rulemaking notice, which stretches 132 pages, includes a whole host of proposed changes, including how the OCC permits certain derivatives activities, tweaks to rules covering certain tax equity transactions, and the ability for federally chartered banks to adopt corporate governance provisions under state law.

For reprint and licensing requests for this article, click here.