States move to obviate fintech charter
WASHINGTON — State regulators are offering a sizable carrot in addition to wielding a stick in their battle against the federal fintech charter.
The Conference of State Bank Supervisors announced a raft of initiatives on Wednesday designed to make the state licensing system more attractive to fintech companies, ranging from harmonizing supervision to allowing fintech companies to discuss their concerns directly with regulators.
“We are committed to a multi-state experience that is as seamless as possible,” Charles G. Cooper, the chairman of the bank supervisor group and banking commissioner for Texas, said in a press release. “State regulators will transform the licensing process, harmonize supervision [and] engage fintech companies."
The CSBS plans to redesign the Nationwide Multistate Licensing System, a state-developed platform for the mortgage market, to include the fintech industry. It aims to make it a more automated process that can "streamline multi-state regulation."
In addition, the states will open up a new line of dialogue with fintechs through an advisory panel focused on online lending and money transmission that will work to “identify points of friction in licensing and multi-state regulation.”
The state regulator group also aims to improve coordination between state and federal examiners on their supervision of fintech companies and their bank partners. It is developing a common technology platform for state examinations and backing legislation that would facilitate supervision of third-party service providers to banks, which can be regulated by both federal agencies and states.
Responding to criticism that certain states lack the resources to oversee fintech companies, the CSBS also said it would create an “enhanced” accreditation program to educate regulators on the issue. Additionally, the states plan to increase awareness of money laundering laws among fintech companies, a step they presented as a solution to banks' practice of cutting off banking services to fintech firms, notably cryptocurrency companies, because of potential regulatory concerns.
The overall initiative, labeled Vision 2020, appears to be a response to the Office of the Comptroller of the Currency’s own “responsible innovation” efforts, which culminated in the creation of a new office last year to correspond with fintechs and the banks interested in partnering with them.
The CSBS and a number of individual states have fiercely opposed the OCC’s other main fintech initiative — the development of a special-purpose national bank charter for payments processors, online lenders and other new entrants in the financial industry. The state regulator group sued the Comptroller's Office last month, arguing it lacked the legal power to move forward.
By harmonizing state licensing requirements and working more closely together, state regulators appear to want to eliminate a key reason to seek the OCC charter, namely the ability to deal with one federal agency and follow a single set of rules.