ABA Welcomes OCC’s Principles for ‘Responsible Innovation’

The American Bankers Association today applauded the Office of the Comptroller of the Currency for its white paper outlining principles for how the agency will support innovation in the financial system. The principles are organized around what the agency calls “responsible innovation” that provides flexibility for banks and nonbanks to serve customers better while maintaining sound risk management and consumer protection standards.

“We support any measure that allows banks to better innovate for the benefit of their customers and local economy,” said ABA President and CEO Rob Nichols. “The OCC’s focus on responsible innovation lines up with our core belief that banks should be empowered to innovate and that consumers should feel confident they have the same protections when doing business with any financial services provider—bank or nonbank. We look forward to continuing our collaboration with the OCC to ensure banks remain leaders of financial innovation.”

The OCC’s principles focus on providing dedicated agency resources to support inquiries from financial providers about innovative activities. To do this, the agency would need to foster an internal culture receptive to innovation and leverage in-house expertise, while also seeking feedback from outside stakeholders and collaborating with other regulators.

“Banks have to continuously adapt to prosper, and we, as regulators, have to be knowledgeable enough to understand new technology and nimble enough to render timely decisions on matters requiring regulatory approval, as well as guidance about our supervisory expectations,” Comptroller of the Currency Thomas Curry said in a Boston-area speech today. “We want to be sure we’re in a position to quickly evaluate products that require regulatory approval and identify the risks that go with them—as well as the safeguards that will be necessary to manage those risks.”

The OCC’s white paper places the focus of fintech regulation on “fair access to financial services and fair treatment of consumers” while “further[ing] safe and sound operations through effective risk management.” Nichols noted that “banks are helping consumers by delivering innovative products and pursing new partnerships.”

As part of that process, Curry highlighted benefits of banks allying with nonbank fintech firms to offer new products, noting that these partnerships can combine banks’ customer relationships, deposit bases and cybersecurity protections with new sources of innovative technology. However, Curry cautioned that all participants in these partnerships would need to manage risks appropriately and comply with consumer protection rules. “I would be very concerned, for example, if we were to authorize a federal license that offers the benefits of the national bank charter, including preemption, without any of the safeguards or responsibilities that apply to banks and thrifts,” he said.

The OCC sought feedback on several areas related to its supervision of financial innovation. Comments on the white paper are due by May 31. The OCC will also host a Washington, D.C., forum on responsible innovation on June 23. For more information, contact ABA’s Rob Morgan.