Acting Comptroller of the Currency, Michael Hsu, testifies before a Senate Banking, Housing, and Urban Affairs Committee hearing on Capitol Hill in Washington, U.S., May 18, 2023. REUTERS/Evelyn Hockstein/File Photo
(Reuters) - Banks that work with financial technology companies to offer banking services should be actively managing risks associated with those relationships, a leading U.S. bank regulator said Wednesday.
THE TAKE
Michael Hsu, the acting Comptroller of the Currency, has long expressed concern about certain gaps in the regulation of the payments system, emphasizing the responsibilities regulators have to ensure that banks are monitoring for risks stemming from third-party arrangements.
Nonbank fintech companies often work with banks in order to provide banking services like checking and savings accounts to their customers. But Hsu's concern with what he has called the "exponential growth" of those partnerships is the possibility that responsibilities for monitoring risk can become muddied when multiple firms, sometimes with different incentives, share responsibilities.
THE CONTEXT
Hsu's remarks on Wednesday at Vanderbilt University come weeks after the Office of the Comptroller of the Currency issued a consent order to Virginia-based Blue Ridge Bank for failing to correct previous problems flagged by the regulator related to its work with fintech companies.
The bank has said the consent order was not reflective of progress it had made since June to limit its fintech partnerships.
The Federal Deposit Insurance Corp. in January also made public two consent orders related to bank-fintech partnerships.
MORE
While the OCC welcomes applications from fintech companies for a national bank charter, the regulator doesn't plan to give those firms any special consideration, said Hsu.
"We will not... lower our standards, create a special regime, or take an overly expansive view of banking to entice new entrants or in the hope of bringing a particular activity into the bank regulatory perimeter," he said.
(Reporting by Hannah Lang in Washington; Editing by Chizu Nomiyama)
