The acting comptroller of the Office of the Comptroller of the Currency (OCC) argued for the regulatory importance of introducing a charter for fintech and payments companies amid the growing trend of "unbundling," as companies increasingly offer financial services outside of the traditional banking system during a LendIt Fintech virtual conference Tuesday.
"Do we let 38% of lending leave the banking system and no longer supervise it? I'm not saying supervision is the end-all, be-all. But there is risk in this business, and no one is managing it," Acting Comptroller Brian Brooks said.
Brooks said a national charter for fintechs and payments companies is the appropriate response to the ongoing unbundling of financial services.
"Unbundling is not going away," he said. "Customers want what they want. The question is, is our platform flexible enough to accommodate that? And I think it has to be."
Brooks' comments came the same day several trade groups sent a letter to Congress expressing opposition to the OCC's plans for a payments charter.
The American Bankers Association, the Bank Policy Institute, the Independent Community Bankers of America and The Clearing House expressed their concerns with granting a payments charter to nondepository institutions in a letter to lawmakers Tuesday ahead of a House Financial Services Committee hearing.
"We oppose the OCC's effort to grant commercial companies like Amazon or Facebook a national payments charter to access to the Federal Reserve payments system and safety net ... without protecting the financial system and consumers from the concomitant increase in systemic risk," the groups wrote.
Brooks has addressed trade groups' concerns over his efforts to grant fintechs and payments companies charters in the past.
"I think the misunderstanding that some of these trade groups are operating under is that somehow this is going to trigger a lighter-touch charter with fewer obligations, and it's going to make the playing field un-level," Brooks said during a Brookings Institution event in reference to a July letter from several trade groups representing banks and credit unions. "I think it's just the opposite."
Brooks also addressed the agency's legal battle over its fintech charter, a proposal the OCC first introduced in 2016, under former Comptroller Thomas Curry.
The special-purpose fintech charter, which would give fintech companies access to the nationwide financial system without needing a license in all 50 states, was struck down last October after the U.S. District Court for the Southern District of New York ruled the regulator lacks the authority to grant charters to nondepository institutions.
"We're going to win these cases," Brooks said. "The OCC has never lost a case on bank powers in the U.S. Supreme Court. And yet in every generation, every new thing the OCC has done to adapt to markets has always been challenged. So there's nothing new about the fact that New York is suing us."