Acting Comptroller of the Currency Michael J. Hsu said he supports “federal payments regulation and a chartering regime for nonbanks.”
In a written statement on the state of the federal banking system prepared for his Wednesday (Nov. 20) testimony before the House Financial Services Committee, Hsu said that if FinTechs remain licensed and regulated only at the state level, some of them are likely to exploit any regulatory gaps.
“I support the Treasury Department’s call for federal payments regulation and a chartering regime for nonbanks,” Hsu said in the statement. “If well designed, such a system — which could be modeled on the dual banking system with distinct roles for federal versus state authorities — would provide the guardrails necessary to close regulatory gaps, protect consumers and promote more responsible innovation and competition.”
The digitalization of banking and the rise of nonbank FinTechs has enhanced innovation and competition but has also confused consumers and diffused responsibility, Hsu said.
The Office of the Comptroller of the Currency (OCC) has been working to highlight and address these challenges since 2021, he said.
As one example, he pointed to interagency guidance on third-party risk management that included bank-FinTech arrangements. This was issued in 2023 by the OCC, the Federal Reserve Board and the Federal Deposit Insurance Corp. (FDIC).
In addition, the agencies issued a request for information on bank-FinTech arrangements in July, Hsu said.
Addressing another priority of the OCC, Hsu said the government and banks must guard against complacency and prioritize strong risk management, focusing on at-risk credit concentrations, liquidity risk profiles and increasingly sophisticated fraudsters.
Hsu also emphasized fairness, saying the OCC, consumer advocates, research organizations and banks can work together to measure consumers’ financial health and deliver better products and services.
A fourth priority of the OCC is managing climate-related risks. For example, Hsu said banks will have to adapt to the impacts of the increasing frequency and severity of extreme weather events that may affect the availability and affordability of insurance and the valuations of assets.
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