The U.S. Treasury Department provided a sneak peek into a report regarding the U.S. economic markets, including the state of retail banking. The full report will be released sometime this month. This report considers the intersection of regulation, regulators and financial technology firms. Craig Phillips, counselor to Treasury Secretary Steven Mnuchin provided some of the report contents in a speech this week as reported in the American Banker. Treasury sees itself playing a role in encouraging financial innovation by moving along the idea of a specialty bank charter and by creating “sandboxes”, mimicking practices in the UK:
In particular, Phillips said Treasury would like to encourage regulators to offer sandboxes, which provide relief from certain regulatory requirements in a space where fintech startups can test products and government authorities can offer guidance. Other countries, including the United Kingdom, have offered such setups. But there needs to be more cooperation among regulators in the area, Phillips said.
It’s not entirely clear yet how a sandbox, where presumably software could be tested to ensure compliance with regulation, actually provides relief from regulation, but perhaps the details are in the full report. (And will sandboxes be available just for Fintechs)?
The topic of the national banking charter that has been talked about now for years will also be a part of this report. The current OCC leadership plans to release more details on this next month. That doesn’t necessarily mean that this new charter type will be available then. There are still many hurdles yet to be crossed:
While not going into details of the yet-to-be-released report, Phillips said it will also cover the benefits of fintech charters at the state and national level. It’s been a controversial topic since a national fintech charter framework was proposed under former Comptroller of the Currency Thomas Curry. State regulators tried to halt the plan by suing the OCC. Current OCC head Joseph Otting has not taken a position on the national charter, but said he will announce one by next month.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
