Federal banking agencies should use their request for information on bank partnerships with financial technology companies to modernize their approach to regulation and supervision so they can provide banks “with a meaningful, transparent and consistent path to innovation,” the American Bankers Association said today.
Earlier this year, the Federal Reserve, FDIC and Office of the Comptroller of the Currency issued the request along with a related joint statement “to note potential risks related to arrangements between banks and third parties to deliver bank deposit products and services to end users.” In a letter to the agencies, ABA said the input the agencies receive “will be an important tool to help the agencies learn more about how banks partner with fintechs to deploy financial products and services”
At the same time, ABA said banking agencies should use the opportunity to ensure that regulatory requirements do not duplicate existing law and regulations and that the agencies’ supervisory practices are aligned.
“We urge regulators to avoid viewing all bank-fintech partnerships as inherently risky and warranting heightened regulatory scrutiny, otherwise creating a stigma,” ABA said. “Treating all arrangements as if they pose the same types and degree of risk is an inefficient use of regulatory resources, and would discourage the development of new products and delivery channels that enable banks to remain relevant and viable in the modern economy.”
A more effective means to address fintechs’ compliance is through the Bank Service Company Act, which provides the agencies with the statutory authority to examine and regulate the performance of certain services provided by third-party providers, ABA said. “We urge the agencies to exercise this authority with respect to a broader universe of fintechs. While the agencies have used their BSCA authority to issue enforcement actions against financial technology firms, they have backed away from this approach in recent years.”
