The House Financial Services Committee, led by Chairman Patrick McHenry (NC-10), has addressed federal banking regulators with a letter in response to a request for information regarding bank-fintech partnerships. The communication was directed at the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation.
The committee members stressed that responsible innovation through these partnerships is beneficial for both consumers and the financial system. They emphasized that understanding the unique nature of various bank-fintech collaborations is crucial to avoid hindering innovation while ensuring proper regulation and consumer protection.
In their letter, they stated: “We write regarding the above referenced Request for Information (RFI) issued on July 31, 2024, focusing on the emerging trends in the financial technology (fintech) space. Innovation, including technological advances, in the financial system have and will continue to play an important role in the form of new products and services."
They highlighted several potential benefits of such arrangements: "low-cost and more accessible financial products and services for consumers; tailored and seamless financial applications for consumers and businesses; an increased deposit base for community banks; and heightened competition in our financial system."
The lawmakers also noted that some business models might be novel but argued that novelty alone should not discourage banks from pursuing partnerships. They urged regulators to provide clarity during examinations to allow firms to innovate without fear.
Additionally, they called for improved communication with state banking regulators who often charter fintech partner banks. These insights are deemed critical during examinations due to their frontline experience with innovation.
The letter concluded by criticizing heavy-handed regulatory approaches as counterproductive: “Heavy-handed and unclear examinations of fintech partner banks, ill-fitting regulatory treatment of blockchain technology used by financial institutions, and the FDIC’s flawed brokered deposits proposal will not protect consumers or the financial system.”