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FintechMortgagePolitics & Money

OCC to begin offering bank charters to nonbank fintech companies

Move already angering state regulators

Tuesday was a big day for fintech companies.

In addition to the Department of the Treasury rolling out a series of proposals that could alter the playing field for fintech companies, the Office of the Comptroller of the Currency also announced Tuesday that it will begin offering bank charters to nonbank fintech companies.

The change, which goes into effect immediately, overturns years of opposition to the OCC expanding its bank charter rules.

But, according to the banking regulator, the decision is “consistent with bi-partisan government efforts at federal and state levels to promote economic opportunity and support innovation that can improve financial services to consumers, businesses, and communities.”

In a statement, Comptroller of the Currency Joseph Otting said that fintech companies that offer banking services “deserve the opportunity” to be treated similarly to federally chartered and regulated banks.

“A national bank charter is only one option among many for companies engaged in the business of banking. Other options include pursuing state banking charters, appropriate business licenses, and partnerships with other federal or state financial institutions,” the OCC said in a statement. “The option to apply for a national bank charter allows these companies to choose the best business model and regulatory structure for their business and strategic goals, which will help them meet the needs of their customers throughout the nation.”

According to the OCC, each application for a banking charter will be reviewed based on its “unique facts and circumstances.”

Additionally, fintech companies that receive a special purpose national bank charter will be supervised like “similarly situated national banks,” including rules involving capital retention, liquidity, and financial inclusion commitments.

Much like banks, fintech banking companies would have to submit an “acceptable contingency plan” that would lay out a plan to deal with “significant financial stress” that could threaten the company’s existence.

The OCC said that the decision to expand the its chartering authority was made with careful consideration and follows a two-year period of “extensive outreach” to stakeholders throughout the financial services industry.

“Over the past 150 years banks and the federal banking system have been the source of tremendous innovation that has improved banking services and made them more accessible to millions. The federal banking system must continue to evolve and embrace innovation to meet the changing customer needs and serve as a source of strength for the nation’s economy,” Otting said in a statement.

“The decision to consider applications for special purpose national bank charters from innovative companies helps provide more choices to consumers and businesses, and creates greater opportunity for companies that want to provide banking services in America,” Otting continued. “Companies that provide banking services in innovative ways deserve the opportunity to pursue that business on a national scale as a federally chartered, regulated bank.”

Otting also said that the change will benefit consumers by giving them more choices for financial services.

“Providing a path for fintech companies to become national banks can make the federal banking system stronger by promoting economic growth and opportunity, modernization and innovation, and competition,” Otting concluded. “It also provides consumers greater choice, can promote financial inclusion, and creates a more level playing ground for financial services competition.”

The OCC’s move is already earning the ire of some state financial regulators, including one of the nation’s most prominent ones, the New York Department of Financial Services.

In a statement, NYDFS Superintendent Maria Vullo said that the move is actually in violation of the National Bank Act.

“DFS opposes today’s decision by the Office of the Comptroller of the Currency to begin accepting applications for national bank charters from non-depository financial technology companies,” Vullo said in a statement. “DFS believes that this endeavor, which is also wrongly supported by the Treasury Department, is clearly not authorized under the National Bank Act. As DFS has noted since the OCC’s proposal, a national fintech charter will impose an entirely unjustified federal regulatory scheme on an already fully functional and deeply rooted state regulatory landscape.”

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