Five Issues to Watch as OCC Mulls Fintech Charters

By Gregory Roberts

Nov. 7 — The Office of the Comptroller of the Currency could soon decide whether to offer national charters to financial technology companies, and as a Magic 8 Ball might say, “Signs point to yes.”

Comptroller Thomas Curry mentions the possibility frequently in public appearances, though he is careful not to go beyond what he said Nov. 3 in a speech in London. The charter question “is one we are still working through,” Curry said in his speech. “We are still deliberating about whether it makes sense to grant a national bank charter to fintechs, and under what conditions.”

More concrete signals come from a couple of arcane regulatory moves by the agency in September: A Sept. 13 proposed rule that deals with receiverships for insured national banks, and a Sept. 28 revision of its charters booklet for the Comptroller’s Licensing Manual that addresses possible trust and special-purpose charters for charter-holders lacking deposit insurance.

Both represent a clearing of the underbrush to open the way for a fintech charter, an issue explicitly addressed by the OCC in the Sept. 13 notice. As Promontory, the global consulting firm, said in a report on the rulemaking, “The OCC did not issue its proposal because it suddenly discovered it needed a resolution regime for uninsured national banks.” There are just 52 institutions that fit that description, and the OCC has not placed such a bank in receivership since the Great Depression.

A decision by Curry’s office on fintech charters has been anticipated by the end of the year, but Curry indicated it will not be a final one. “We plan to issue a paper soon to describe our thoughts on this important question and seek comment on our approach,” he said in London.

If and when the OCC unveils its proposal for a fintech charter, here are five things to look for:

One: Who Will Be Covered?

The OCC exercises charter-granting authority for ventures that engage in at least one of the typical banking functions of taking deposits, lending money or paying checks. The lending criterion would take in online platform lenders, for example, but how wide is the “paying checks” qualification? Would it cover fintech companies engaged in all kinds of payment processing? And what about fintechs focused on distributed ledger technology, aka blockchain, for money transfers and trade settlements?

Two: Capital Requirements

It remains to be seen how the OCC will set capital and liquidity requirements for companies to receive a fintech charter. The national trust banks are not held to the same funding standards as banks that accept deposits from the public and make loans, so there’s precedent for flexibility, but where the OCC sets the bar is significant.

Three: Leveling the Playing Field

Banks are worried that fintech companies may gain an advantage if they’re not held to the same standards as the banks. Some regulations, such as those under the Community Reinvestment Act, are limited by law to depository institutions, but the OCC already has said it believes it can qualify the granting of a non-bank charter to fintechs on the basis of compliance with CRA-like regulations.

In his London speech, Curry said, “Let me be clear: If the OCC decides to grant a national charter in this area, the institution will be held to the same high standards of safety, soundness and fairness that other federally chartered institutions must meet.”

Four: Application Process

How long will it take to apply for and receive a charter? In an innovative industry, that question “is obviously important to a bunch of companies that are used to moving very quickly,” David Luigs, a partner at Debevoise & Plimpton LLP in Washington, told Bloomberg BNA.

Five: Partnerships With Banks

The OCC will be looking to strike a balance between its primary duty to preserve the safety and soundness of the national banks it supervises and its stated intention to promote what it calls responsible innovation.

“The OCC is always going to be concerned about the risk that a fintech company is going to pose to a regulated bank and the financial system at large,” Michael Krimminger, of Cleary Gottlieb Steen & Hamilton LLP in Washington, told Bloomberg BNA.

Many banks have formed partnerships or third-party vendor arrangements with fintech firms — relationships already monitored by regulators from the banks’ end — and the non-bank charters could intrude further on that space by setting terms for the fintech companies’ engagement.

Will They Use It?

Some fintech companies look to national charters as a way to simplify their operations by, for example, pre-empting the patchwork of state laws that govern lending. But others are skeptical, viewing the concept as just another layer of government regulation.

If the OCC does decide to go ahead with a charter proposal, the ball will cross to the court of the fintech companies, Peter Dugas, a former deputy assistant secretary at the U.S. Department of the Treasury, told Bloomberg BNA; Dugas now leads the Center of Regulatory Intelligence in Washington for FIS, a technology and consulting firm.

“They’ll be wanting to do an assessment of whether the current regulatory structure under which they work is a better structure than going under a fintech charter, where their options may be limited and there may be more compliance cost,” Dugas said.

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To contact the editor responsible for this story: Michael Ferullo at

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