Today, the House Financial Services Subcommittee on Financial Institutions and Monetary Policy, led by Chairman Andy Barr (KY-06), is holding a field hearing in Lexington, Kentucky entitled “Financial Institution-Fintech Partnerships: Leveraging Third-Party Relationships to Increase Access to Financial Services.”
Chairman Barr opened the hearing with remarks addressing the significance of third-party partnerships for community banks and credit unions. "I welcome and thank all of today’s witnesses and my colleagues who were able to make today’s hearing in the sixth district of the great Commonwealth of Kentucky," Barr said.
Barr emphasized bipartisan interest in supporting community banks and credit unions. He noted concerns about a potential decline in the dynamism of the banking system. "We do not want to end up with a barbell banking system, with a bunch of too-big-to-fail banks on one end, a scattering of small institutions on the other end, and not much in between," he stated.
The focus of the hearing was on partnerships between financial institutions and third-party vendors that utilize innovative technologies. These collaborations can improve service efficiency, compliance with legal requirements, operational risk management, and data protection. However, Barr highlighted that proper risk management remains crucial.
"As innovation in the provision of financial services accelerates," Barr remarked, "it remains important that a proper balance be struck between fostering innovation and attention to due diligence to ensure safety, soundness, stability, and consumer protection."
Barr also criticized recent regulatory actions for stifling innovation. He referenced joint guidance issued by federal agencies like the Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and Federal Reserve in June 2023. This guidance has been met with criticism from within these agencies for creating ambiguity rather than clarity.
"Opaque guidance and rules create more ambiguity for banks," Barr argued. "Ambiguity equates to higher prices and fewer options for consumers."
Community banks have expressed concerns over this guidance's lack of clear directives. According to Barr, such vagueness could impede service adoption and lead to regulation by enforcement.
"I look forward to hearing about experiences of today’s witnesses," concluded Barr, inviting suggestions for improving the financial landscape both locally in Kentucky and across the United States.