Insights & Analyses

OCC to Announce Fintech Charter Decision – One World Identity

December 1, 2016

After months of deliberation, the Office of the Comptroller of the Currency is expected to announce this Friday whether to craft a charter specifically for fintech companies, according to American Banker.

The decision comes on the heels of the OCC’s October framework agreeing to support financial services with responsible innovation. Early recommendations include providing outreach, training programs, and technical assistance to fintech firms operating in a highly regulated environment. The OCC will also create an Office of Innovation to provide oversight of the efforts.

There has been speculation ahead of Friday’s announcement as to what a fintech charter could entail. Banks have expressed concern that by leveling the playing field, fintech firms may receive an unfair advantage if they are not held to the same regulatory standards.  Several current regulations that apply to insured depository institutions may not necessarily extend to non-traditional banking counterparts.

Comptroller of the Currency Thomas Curry addressed these concerns in a November 3 speech in London, “if we at the OCC do decide to grant limited-purpose charters in this area, the institutions who receive the charters will be held to the same strict standards of safety, soundness, and fairness that other federally chartered institutions must meet.”

Fintech firms have been eager to have financial innovation woven into the traditional banking framework. “Such an effort would create alignment for regulators overseeing similar financial activity,” said Ryan Zagone, One World Identity Advisor and Director of Regulatory Relations at Ripple. “Technology companies and financial institutions would benefit from clarity and consistency.”

Questions remain as to what types of fintech firms will be covered by the charter. In the Proposed Rules, the OCC outlines its ability to charter special purpose banks that are engaged in core banking functions — namely receiving deposits, paying checks, or lending money. Therefore, the announcement may answer lingering questions as to whether fintech companies focused on distributed ledger technology or blockchain will be included.