Oct. 26 — The Office of the Comptroller of the Currency (OCC) will create a separate office within the agency to promote “responsible innovation” in the banking and financial services industries, the OCC announced Oct. 26.
The announcement did not include a decision by the OCC on the possible issuance of national charters to nonbank fintech companies, a subject much discussed in the industry. The OCC said it continues to study the charters question and has not made a determination as of yet. The agency plans to publish a paper by the end of the year examining the topic and seeking comment (189 BBD, 9/29/16).
“The OCC supports responsible innovation that enhances the safety and soundness of the federal banking system, treats customers fairly, and promotes financial inclusion,” Comptroller Thomas Curry said in a prepared statement. “By establishing an Office of Innovation, we are ensuring that institutions with federal charters have a regulatory framework that is receptive to responsible innovation and the supervision that supports it.”
The office will get under way in the first three months of 2017 under the direction of a chief innovation officer in Washington, who will oversee staff there and in New York and San Francisco, the OCC said. Beth Knickerbocker, a counsel for legislative and regulatory activities at the OCC, has been named acting chief innovation officer.
The office will work to provide technical assistance for banks and nonbanks, train OCC staff, establish a program of research on innovation and foster collaboration with other federal agencies.
It is designed for more informal exchanges with banks and other industry participants, outside the OCC's standard mode of supervision and examination, Curry said in a conference call coinciding with the announcement. Activities might include developing pilot projects for new products, though without waiving any regulations, or scheduling times for general discussions with innovators about OCC concerns and practices, agency officials said
The announcement follows up on a white paper on responsible innovation that the OCC released March 31, the same day that Curry gave a speech at Harvard on the topic.
The March white paper laid out eight “guiding principles” for the OCC's approach to innovation, which include supporting responsible ideas; developing a receptive agency culture; building on the OCC's experience and expertise; encouraging innovation that provides fair access to financial services while protecting consumers; promoting safe and sound operations through risk management; urging banks to take innovation into account in their strategic planning; and improving discussion of innovation through formal outreach programs.
The speech and white paper were not the OCC's first attempts to come to terms with innovation in financial services, a sector revolutionized in recent years by technological developments such as online platform lending, mobile payments and wallets, distributed ledgers, cryptocurrencies and mobile banking.
In August 2015, Curry announced the agency would work on developing systems to identify and understand industry trends and innovative approaches, as well as the changing needs of consumers. The OCC assembled a team of policy experts, bank examiners, lawyers and staff members to study the issues and design a framework for assessing innovations, and the team met with bankers from community, midsize and large banks, innovators, consumer groups, academics and other regulators.
Some themes had emerged from those undertakings, the white paper said. Representatives of banks and nonbanks said the ground rules for developing innovative products and services are unclear. Banks, especially smaller ones, said they were uncertain about what the OCC expects regarding their partnerships with nonbanks. The nonbanks also said they want to learn more about the regulations and supervision they will face as they form relationships with banks, the white paper reported.
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