What’s Missing From the OCC’s Fintech Charter
By Karen Shaw Petrou
The Office of the Comptroller of the Currency recently finalized its controversial decision to authorize a special-purpose fintech charter. Although the OCC emphasizes that it’s holding these special-purpose charters to standards equivalent to those demanded of national banks, this is only sort of true with regard to the named prudential requirements, and it looks to be completely incorrect on critical restrictions on competitive and financial risk. These omissions have significant consumer protection, safety and soundness and structural impacts. Absent egregious violations, a charter granted cannot be revoked. The OCC should be sure it isn’t a shadow-bank enabler before it hands out these high-powered charters. If other U.S. regulators follow the OCC’s example and grant charters or authorize ground-breaking activities before these policy questions are fully considered, a lot of embedded risk could quickly confront both consumers and the overall financial system. The OCC says that it’s for “responsible innovation.” But to spur this kind of innovation, agencies need to go into depth on structural policy questions, not decide them on a case-by-case basis in the dark corners of each charter approval.
A version of this post was previously published on the Federal Financial Analytics blog.