John Ryan, president of the Conference of State Bank Supervisors (CSBS), has come out in support of the New York banking regulator's lawsuit filed on Friday against the federal OCC. He called its plans to offer special purpose charters to financial technology (fintech) firms, allowing them to compete with banks nationwide, "unlawful" and "harmful".
"CSBS strongly supports the lawsuit filed by the New York Department of Financial Services against the Office of the Comptroller of the Currency (OCC), " said Ryan in a forcefully worded statement.
"The OCC does not have the authority to issue federal charters to non-banks, and its unlawful attempt to do so will harm markets, innovation and consumers."
Even before New York joined the federal versus state stand-off, the OCC's federal fintech charter was already under threat from CSBS' own lawsuit filed in Washington last month and the departure of its champion Thomas Curry on 5 May at the behest of President Donald Trump.
The turf war over who gets to supervise fintechs is escalating with CSBS's rival 'Vision 2020' regulatory plan appearing to gain ground against the federal fintech charter.
Acting OCC head Keith Noreika, is not known to be a strong supporter of the Special Purpose National Bank (SPNB) fintech charter, which was previously championed by Curry. The OCC is an independent agency within the Treasury and is responsible for overseeing the nation's biggest banks, including Bank of America, JPMorgan and Wells Fargo.
Other countries have nationwide fintech policies and support groups such as the Hong Kong Securities and Futures Commission's (SFC) Fintech Contact Point, unveiled last year, and the Financial Conduct Authority's (FCA) Innovation Hub in the U.K. But the drive to introduce similar initiatives in the U.S. have been stymied by arguments over whether federal or state governments are best placed to encourage fintech innovation, while still providing effective consumer protection.
Ryan called the OCC's SPNB plan, "an unauthorized expansion of its authority" in a statement released late on Friday that went on to claim the federal fintech charter "threatens state sovereignty".
"State regulators already supervise a vibrant financial services marketplace that includes non-banks and banks," he said. "Where there are opportunities to further modernize state regulation of financial services providers, including fintechs, state regulators are committed to doing so through our recently launched 'Vision 2020' initiative."
The state-backed 'Vision 2020' plan released by CSBS last week aims to make the U.S. state system of financial regulation pre-eminent, while still recognizing standards that can be applied across state lines to enable nationwide fintech innovation.
According to CSBS its rival plan, outlined in a statement released on 10 May, "will create consistent and data-driven solutions" that support innovation "by minimizing friction in the state regulatory system."
By 2020, state regulators plan to adopt an integrated fintech licensing and supervisory system across 50 States that will transform the interaction between industry, regulators and consumers.
"We are committed to a multi-state experience that is as seamless as possible," said CSBS chair and board member, Charles Cooper, in a statement. He is also the Texas Commissioner of Banking.
"Through Vision 2020, state regulators will transform the licensing process, harmonize supervision, engage fintech companies, and assist state banking departments," he said, while adding he wants to, "make it easier for banks to provide services to non-banks" and "make supervision more efficient for third parties."
The key actions under the Vision 2020 plan are to:
Follow CNBC International on and Facebook.