McHenry, Committee Republicans Respond to Federal Banking Regulators’ Request for Information on Bank-Fintech Partnerships
Washington,
October 31, 2024 -
The Chairman of the House Financial Services Committee, Patrick McHenry (NC-10), led all Committee Republicans in a letter to federal banking regulators at the Federal Reserve Board (Fed), Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC) responding to a request for information (RFI) on bank-fintech partnerships.
The lawmakers emphasize that allowing responsible innovation through bank-fintech partnerships will benefit consumers and the financial system. Banking regulators must understand the unique nature of different bank-fintech partnerships to avoid stifling innovation, ensure appropriate regulation, and deliver critical consumer protections
Read the full letter here or below:
“We write regarding the above referenced Request for Information (RFI) issued on July 31, 2024, focusing on the emerging trends in the financial technology (fintech) space. Innovation, including technological advances, in the financial system have and will continue to play an important role in the form of new products and services. Given fintech’s evolving nature and promising potential to enhance our financial system, it is essential that these newer products and services are not treated with undue regulatory scrutiny, which will only lead to stifling innovation.
“The potential benefits of bank-fintech arrangements hold significant promises: low-cost and more accessible financial products and services for consumers; tailored and seamless financial applications for consumers and businesses; an increased deposit base for community banks; and heightened competition in our financial system. As the RFI highlights, there are many different types of bank-fintech partnerships with varying complexities. Regulators should understand the nature of each type of partnership to avoid stifling innovation. Regulation and supervision should be appropriately scaled to address the nature of the partnership, not a one-size-fits-all approach. Consumers should be afforded the same protections they are afforded under existing law, regardless of how they access financial services.
“Some business models can be novel, but novelty does not in and of itself justify discouraging banks from pursuing partnerships. This includes communicating with banks during the examination process to better understand the roles and responsibilities. In regulation and supervision of bank-fintech partnerships, regulators should seek to provide clarity to ensure firms can innovate without fear. Regulators should also be cautious not to overstep statutory authority. Instead, regulators should collaborate to identify any existing gaps in authority and work with Congress.
“In addition, communication with state banking regulators should be strengthened. More often than not, it is state regulators who charter many fintech partner banks. Their insights are critical during the examination process having been on the frontline of innovation. Regulators can learn from their approach to safety, soundness, and consumer protection, including through the creation of regulatory sandboxes at both the state and federal level.
“Heavy-handed and unclear examinations of fintech partner banks, ill-fitting regulatory treatment of blockchain technology used by financial institutions, and the FDIC’s flawed brokered deposits proposal will not protect consumers or the financial system. Instead of stifling innovation, regulators should allow responsible innovation to better serve our constituents and the financial system more broadly.
“Thank you for your attention to this important matter.”
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