US fintech charter imperiled as Curry leaves

Neil Ainger, Writer at
The outgoing US Comptroller of the Currency (OCC) head, Thomas Curry.
Jonathan Ernst | Bloomberg | Getty Images

A federal plan to issue national 'special purpose' bank charters in the U.S. to financial technology (fintech) companies, in order to encourage innovation, is under threat due to the imminent departure of comptroller of the currency head, Thomas Curry, at the behest of President Donald Trump.

Curry had planned to stay on after officially finishing his five-year term as Comptroller last month so that he could push through his controversial fintech charter, which has encountered opposition from state bodies in the U.S., but the Trump administration has moved to announce his departure on May 5.

His replacement as acting head will be Keith Noreika, a partner at law firm Simpson Thacher & Bartlett. The Office of the Comptroller of the Currency is an independent agency within Treasury and is responsible for overseeing the nation's biggest banks, including Bank of America, JPMorgan and Wells Fargo.

Noreika is a member of the Trump transition team and has extensive experience advising banks on regulatory issues. His opinion about Curry's fintech plans are not known, but without a strong supporter in the government they are likely to fall by the wayside.

It could take months to get Curry's long-term replacement approved by the Senate. Joseph Otting, a former associate of Treasury Secretary Steven Mnuchin at OneWest Bank, has been mentioned as a possible nominee.

The Special Purpose National Bank (SPNB) fintech charter plans championed by Curry have encountered strong opposition from U.S. state supervisors who want to protect their own existing policies that are in place to nurture innovation and protect consumers at the state level of government.

The dispute reached crisis point late last month when the Conference of State Bank Supervisors (CSBS) filed a lawsuit in the U.S. district court of Columbia on 26 April, alleging that the OCC is over-stepping its authority in granting charter status to non-banks.

Fintech challenger banks do not necessarily face the same prudential and regulatory rules that established banks that take deposits do. This disconnect is at the heart of the conflict, along with long-standing tensions about where state and federal rules should apply.

The potential elimination of the fintech charter may retard the number of new tech-enabled 'challenger' banks that arise in the U.S. to compete with established incumbents. It is feared some may be put off by the complicated and expensive process of applying for a full banking license if the fintech charter fails.

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