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OCC Plans to Offer Financial Technologies Firms a Special Charter Status

The U.S. Office of the Comptroller of the Currency (OCC) has said it plans to start accepting applications from fintech companies for a special charter that would formally subject them to federal banking rules. Chartered companies will get the benefits of being an established company in the eyes of the government.

Companies applying for a charter will need to prove that they have a reasonable chance of success, appropriate risk management, effective consumer protection, and strong capital and liquidity. Fintech firms in the U.S. have been lobbying hard for the provision, which will enable them to operate across state lines without having to deal with multiple jurisdictions. With the development of systems such as blockchain, mobile payments systems, and the new approaches to lending taken by companies including LendingClub and On Deck Capital - regulators have scrambled to keep pace. Many of the innovations have popped up without the government restrictions that established financial firms are subjected to. While the charter won't be required for firms to keep lending, the government is trying to provide a framework that will entice companies to sign up. According to the OCC, there are around 4,000 fintech firms in the U.S. already competing with national and state banks.

Just like the oversight that applies to traditional banks, the OCC's special charter will exempt fintech firms from some state laws, like requiring a license to engage in certain types of business. Fintech firms would be subject to rules like those that try to prevent customers from laundering funds. Being designated as a national bank could help extend fintech firms' reach by making them established, giving confidence to potential customers and investors wary about new business models.

News Characteristics

Date : Dec 05, 2016
Region : North America
Industry : Banks
Function : Operations and IT
Sub-Function : Business Transformation