Pub. 9 2018 Issue 3

www.wvbankers.org 16 West Virginia Banker O n July 31, 2018, the Office of the Comptroller of the Currency (OCC) announced it would accept applications for Special Purpose National Bank (SPNB) charters from non-depository financial technol- ogy (fintech) companies engaged in the business of banking. In conjunc- tion with its announcement, the OCC issued a Policy Statement on Financial Technology Companies’ Eligibility to Apply for National Bank Charters (Policy Statement), and a supplement to the Comptroller’s Licensing Manual entitled Considering Charter Applications from Financial Technology Companies (Sup- plement) that describes the key factors the OCC will consider in evaluating charter applications. Although the an- nouncement by the OCC is a major step toward regulation of the fintech indus- try, the move has raised more questions than answers. OCC’S Authority to Issue Charter In the Policy Statement, the OCC indicates that it has authority under the National Bank Act to grant a SPNB char- ter to a fintech company that engages in one or more of the core banking activities of paying checks or lending money, but would not take deposits and would not be insured by the FDIC. The OCC believes that chartering a fintech company as a SPNB provides a framework of uniform standards and robust supervision that will level the playing field for regulated institutions and help ensure that fintech operates in a safe and sound manner. Regulation could also ensure that fintech compa- nies fairly serve the needs of consum- ers, businesses, and communities. In response to earlier OCC pronounce- ments regarding SPNB charters, the New York State Department of Financial Services and the Conference of State Banking Supervisors sued the OCC, claiming that it lacks the legal author- ity to issue this type of charter. The lawsuits were ultimately dismissed by the courts because the claims were not ripe, as the OCC had not yet decided whether to accept applications or issue any charters. It is unclear whether the OCC’s announcement and the filing of applications will result in similar lawsuits by the state regulators. Lack of Specific Requirements for a Charter In the Policy Statement and the Sup- plement, the OCC states that a fintech company that receives a SPNB charter will be subject to the same high stand- ards of safety and soundness and fair- ness that all federally chartered banks must meet and that the OCC will tailor these standards based on the compa- ny’s business model, size, complexity, and risk profile. The OCC also indicates that fintech companies with a SPNB charter will be supervised like similarly situated national banks. These stand- ards include capital, liquidity, stress testing requirements and expectations with respect to financial inclusion and development of contingency plans. The OCC acknowledges that it will consider differences in business models and ac- tivities, risks and the fintech’s uninsured status. Although the Supplement pro- vides guidance to fintech companies on how the OCC will evaluate applications, OCC’s Acceptance of Fintech Applications Creates More Questions Than Answers By Amy Tawney and Elizabeth Frame