U.S. Bank Regulator Considers Ways to Oversee Fintech Firms

  • OCC working to understand and evaluate innovation, Curry says
  • Agency is looking to protect consumers, prevent systemic risk

A top U.S. banking regulator wants to find a better way to oversee new technologies such as blockchain and companies including LendingClub Corp. and On Deck Capital Inc. that are helping to transform the financial services industry.

The Office of the Comptroller of the Currency is moving to establish a framework for regulating the financial technology -- or fintech -- industry, which includes everything from digital currencies to online lending and mobile payments systems, Comptroller Thomas Curry said Thursday. The agency is considering ways it can adapt its processes to provide clearer guidelines for banks as they adjust to rapidly changing technologies and to ensure that new systems face similar scrutiny and safeguards.

“We are working on a framework to help us understand and evaluate innovation," Curry said in remarks prepared for a speech at Harvard University, where he outlined a report detailing the OCC’s approach to financial innovation. “It’s essential that we approach innovation in a thoughtful and responsible way that guards against risk to consumers and threats to the financial system."

Under Pressure

As Silicon Valley entrepreneurs dream up ways to lure customers away from traditional banks and financial firms scramble to compete by offering more technology-driven services, regulators are under pressure to adopt rules that ensure safety without stifling innovation. The OCC report marks one of the first major efforts by a U.S. regulator to weigh how to bring fintech firms into the traditional bank-regulation system.

One measure that’s being considered is granting technology firms that offer financial services products a national bank charter, which would bring them under the OCC’s watch. While Curry acknowledged there’s value in that, he cautioned that any company that receives such a charter should comply with the rules that other financial firms do.

“I would worry about the staying power of some of the new types of lenders,” he said, noting that the community banks his agency oversees know their customers well. “I’m not so sure that customers selected by an algorithm would fare as well in a downturn.”

Seeking Collaboration

To help banks adopt and compete with new technologies, the agency is also considering establishing an office devoted to innovation so that it can more quickly evaluate new products and make it easier for companies to communicate with regulators. The agency also wants banks and technology start-ups to collaborate more with each other and hopes to work closely with other agencies, including the Consumer Financial Protection Bureau, to establish rules and guidelines.

Financial-industry lobbying groups including the American Bankers Association and Consumer Bankers Association are applauding the agency’s efforts.

“The OCC’s focus on responsible innovation lines up with our core belief that banks should be empowered to innovate and that consumers should feel confident they have the same protections when doing business with any financial services provider,” ABA President Rob Nichols said in a statement.

The agency will take public comment on its report through May 31.

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