On January 12, senior OCC officials provided more details about the agency's proposed special purpose national bank charter intended for innovative fintech firms during an ABA member webinar. Webinar presenters were:
- Jim Chessen, ABA Chief Economist
- Beth Knickerbocker, OCC Acting Chief Innovation Officer
- Karen Solomon, OCC Deputy Chief Counsel
- Gary TeKolste, OCC Assistant Deputy - Community & Midsize Banks
WBA listened in to provide our members with an overview of the discussion.
Beginning with an overview of the goings-on at the OCC, officials said fintech and the new charter are a "strategic priority" for the OCC this year, precipitated by the rapid change OCC sees in the industry.
In response, the OCC is putting together a "responsible innovation framework," officials said, including an internal awareness and training program to specifically answer the question of whether the agency has the right skill sets to examine fintech companies.
As part of this initiative, the OCC has created a new Office of Innovation in October 2016. OCC Acting Chief Innovation Officer Beth Knickerbocker says the office acts as a clearinghouse, reports directly to the Comptroller, and primarily exists to help provide assistance to existing banks. The office will have three physical locations (Washington, D.C., New York, and San Francisco), and will be conducting "road shows" throughout the country beginning this year.
Webinar discussion turned to specifics about the characteristics of the new national bank charter. OCC Deputy Chief Counsel Karen Solomon noted that "a firm that gets a fintech special-purpose charter should have obligations related to community investment or financial inclusion." She said the OCC would design ways that firms can meet financial inclusion obligations and that the OCC was preparing a written policy for applications. The new charter is a way for OCC to update its approach to financial inclusion and community investment.
The OCC's fintech policy is "still in the works," officials said, but will provide assurances of consistency.
The webinar closed with a Q&A session, the highlights of which WBA has summarized below:
When will the special purpose charter be available?
The OCC hopes to have it available as early as this Spring, though no specific date has been set.
What are the minimum capital requirements?
That's especially tricky, but there will be balance sheet and asset-based requirements. Officials noted that, similar to Trust Banks, some firms may not have balance sheets that resemble banks'. The amount required will be tailored for some businesses, but will be sufficiently robust. Other items that will be considered include liquidity, corporate governance, robust risk management, detailed business plan, financial inclusion, and cybersecurity. OCC officials indicated they are considering a CAMELS-like rating system for the charter.
How many charter applications do you expect?
There are around 4,000 fintech companies in existence today, but OCC expects only a handful will apply initially. Knickerbocker said the agency will hold applicants to a "very high bar" on par with existing national bank charters, and OCC anticipates this will limit the level of interest. "A number" of companies have already contacted OCC to inquire about the charter.
What type of companies to you expect will submit applications?
OCC said it is anticipating diversity of business models, including marketplace lenders, payments companies and virtual currencies. Officials were clear that start-up companies will not be granted charters; they're planning on "mature" companies. OCC also expects many applicants will want to partner with a bank.
What is the role of the Federal Reserve, particularly with regard to ownership?
The OCC has begun a dialogue with the Fed, though the two agencies are not "in lockstep" at this time.
Does Google get a charter?
"The answer is no." OCC officials assured listeners they have the discretion to consider policy issues such as banking and commerce when reviewing charter applications.
Will banks be free to offer fintech products?
So long as they are on the permissible list, yes.
Will payday lenders receive a special purpose charter?
OCC officials stated they are "very concerned" about the potential for consumer abuse and "we don't want to allow them." They stressed the idea that financial innovation is an opportunity for financial inclusion.