Bank – FinTech and Blockchain Law Watch

Are You in Control (of a Bank)? The Fed’s Proposed Framework for Presuming Control under the Bank and Savings and Loan Holding Company Acts

May 15 2019

By Rebecca H. Laird, Dean A. Brazier and Daniel S. Cohen

On April 23, the Federal Reserve Board (the “FRB”) published a Notice of Proposed Rulemaking (“NPR”) to “simplify and increase the transparency,” while maintaining “consistency” to its determination of whether an entity “controls” a bank or a savings association (collectively, “depository institution”). According to the FRB’s announcement, the NPR is a first draft of a “comprehensive regulatory framework for control determinations.” FinTech companies seeking to become depository institutions should pay close attention to the NPR as it provides clear guidelines for when its investors would become subject to the Bank Holding Company Act (“BHCA”).

“Responsible Innovation” or a “Regulatory Train Wreck”? The OCC Announces it will Accept FinTech Applications for Special Purpose National Bank Charters

Aug 06 2018

By Rebecca H. Laird, Eric A. Love and Daniel S. Cohen

On July 31, 2018, the Office of the Comptroller of the Currency (“OCC”) announced that it will begin accepting applications from non-depository FinTech companies for special purpose national bank charters. It’s a long-awaited announcement that represents the culmination of a two year process during which the OCC sought stakeholder feedback and public comment on the issue.

Among the notable points that the OCC makes in the policy statement are the following:

The OCC has the authority to issue special purpose charters to FinTech companies, an issue that was the subject of previously dismissed legal challenges brought by the Conference of State Bank Supervisors (“CSBS”) and the New York Department of Financial Services (“NYDFS”). In the policy statement, the OCC reiterates its position that the National Banking Act and OCC regulations (12 C.F.R. § 5.20) authorize the agency to grant charters to non-depository FinTech companies that engage in at least one of the “core banking activities” — lending, paying checks or deposit-taking — in addition to the special purpose charters for trust/fiduciary activities;
The OCC’s decision will benefit consumers by encouraging “responsible innovation” in the banking industry. The OCC states that its decision will expand consumer choice, foster innovation in the banking sector, and “level the playing field” between regulated and non-regulated banking services institutions while ensuring FinTech companies operate safely and soundly;
FinTech companies will be held to the same standards and supervision as their similar non-FinTech counterparts, including requirements concerning capital, liquidity, and risk management. OCC-chartered FinTech companies will also be required to maintain a contingency plan for significant financial stress scenarios. The special purpose national bank will not be required to be FDIC-insured, since they will be non-depository institutions; and
FinTech companies may engage in any activity deemed to be permissible for a national bank.

Japan Aims to Facilitate Banking Institutions to Invest in Bank-Related FinTech Companies

Apr 21 2016

By Yuki Sako

On March 4, 2016, the Cabinet of Japan approved and submitted to the Diet an amendment bill to the Banking Act of Japan that would enable banks and bank holding companies to acquire more than the permitted holding of nonbank interests (5% (banks) or 15% (bank holding companies)) of certain nonbank companies whose businesses involve innovative technologies that can be applied in banking business. Under the amendment bill, banking institutions are, with approval of the Financial Services of Agency of Japan (FSA), permitted to acquire and hold a controlling interest in various FinTech companies that would provide innovative technologies to advance banks’ operations or benefit bank customers. When proposing the amendment bill, the FSA explained that the amendment bill aims to facilitate banking institutions to invest in bank-related innovative technologies, IT technologies in particular.

The amendment bill is expected to pass the Diet during the current Diet session and to come into force within 1 year after the promulgation.

Text of the amendment bill can be found here (only in Japanese).

PREPAID ACCESS GARNERS REGULATORY ATTENTION

Mar 25 2016

By Sean Mahoney

Bank regulators are paying more attention to the role of banks in the prepaid card industry as evidenced by their new guidance on the applicability of know your customer requirements and proposed regulations on record-keeping with respect to master deposit accounts for prepaid cards and other products utilizing “pass-through” deposit insurance.

To learn more about the Interagency Guidance to Issuing Banks on Applying Customer Identification Program Requirements to Holders of Prepaid Cards, which provides a framework to determine whether or not a bank must apply its customer information program to holders of prepaid products for which the bank is the issuer, please visit our Consumer Financial Services Watch Blog at Prepaid Access Garners Regulatory Attention.

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