Beth Knickerbocker is chief innovation officer at the Office of the Comptroller of the Currency, the U.S. agency that charters, regulates and supervises all national banks.
The following article is an exclusive contribution to CoinDesk's 2017 in Review.
Innovation in financial services is critical to meeting the nation's changing consumer and business needs, and the OCC's Office of Innovation is working to promote responsible innovation in the federal banking system.
Operational since January 2017, the Office of Innovation is responsible for improving the agency's ability to identify, understand and respond to financial innovation affecting the federal banking system and serves as the agency’s central point of contact and clearinghouse for innovation-related matters.
Early last year, the Office hosted "Office Hours" in technology hubs New York and San Francisco with more than 40 banks and non-banks to gain a better understanding of common issues and concerns that these entities face regarding innovation-related products, services, and emerging technologies.
The goal of the meetings was to provide these entities with candid regulatory advice and give participants a welcoming environment in which to express their views. Other topics discussed at these informal meetings included partnering with banks, third-party risk management expectations and how best to prepare to operate in a highly-regulated environment.
Action points
A dedicated web page was established on OCC.gov with links to innovation guides for community banks, financial technology companies (for example, marketplace lenders and startups in the blockchain technology and cryptocurrency space), and other non-bank institutions.
The page describes the OCC's Responsible Innovation Framework and provides links to innovation-related news, speeches, and special purpose national bank charter information. Banks, non-bank companies, and fintech companies can contact the office through a dedicated e-mail address or phone number.
In addition to Office Hours, the OCC participated in more than 50 outreach events related to fintech and responsible innovation. Additional outreach and awareness efforts included collaborating and sharing information with other domestic and international regulators.
Internally, the Office conducts research, develops awareness materials, and maintains a library of fintech and innovation-related news articles, podcasts, and other resources. This material is available to the OCC workforce so that examiners, in particular, are prepared to discuss innovation topics with bankers and to answer questions about the OCC's responsible innovation efforts.
The Office is also working with the OCC's Continuing Education department on updating training plans to help OCC staff learn more about responsible innovation.
In March 2017, the OCC published a draft supplement to the Comptroller’s Licensing Manual describing its proposed approach to chartering fintech companies.
The draft supplement clarifies the agency's approach to evaluating national bank charter applications from fintech companies, describes how it would supervise these banks and articulates expectations for how these banks would ensure fair access and fair treatment for all customers.
To date, the OCC has not decided whether to exercise its authority to grant special purpose national bank charters to non-depository fintech companies under 12 CFR 5.20(e)(1).
In a July speech to the Exchequer Club, Acting Comptroller of the Currency Keith Noreika made clear that fintech companies can seek national bank charters under other authorities used to charter full-service banks, as well as other, long-established special-purpose national banks, such as trust banks, banker's banks, and Competitive Equality Banking Act (CEBA) credit card banks.
Outlook
Looking ahead to 2018, the OCC is considering developing a program for the OCC to participate in bank pilots to further the its understanding of innovative products, services, processes, or technologies.
A program such as this may accomplish the same goals as what others call "sandboxes," and allow the OCC to foster responsible innovation by OCC-supervised banks and enable participants to obtain OCC feedback early in the development process.
Information gathered in the pilots could also inform OCC policies and ensure that we are ready to supervise the new activity when implemented on a larger scale. Pilots, however, do not provide a safe harbor from banks' compliance responsibilities.
Also in 2018, the OCC will expand its Office Hours program to other financial innovation hubs, build on its outreach and research efforts, and improve the awareness and knowledge of OCC staff on emerging trends in the industry.
The OCC will continue to identify ways to promote and support banks interested in engaging in responsible innovation by partnering with fintechs and other non-bank companies in a safe and sound manner, reducing costs and increasing earnings, and serving their customers more effectively.
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