Republican Legislators Urge Bank Regulators Not to "Stifle Innovation"

House Financial Services Committee Chair Patrick McHenry and fellow Republican legislators urged banking regulators not to impose "heavy-handed and unclear examinations" on fintech partner banks, or "ill-fitting regulatory treatment" on blockchain technology used by financial institutions.

In response to a Request for Information on bank-fintech arrangements issued by the Federal Reserve, the OCC and the FDIC, (see previous coverage), the legislators said that bank-fintech arrangements hold "significant promise," including (i) low-cost and accessible financial products/services for consumers; (ii) tailored financial applications for consumers and businesses; (iii) increased deposit base for community banks; and (iv) heightened competition in the financial system. The legislators urged that regulators distinguish among the different types of bank-fintech partnerships and supervise according to an appropriate scale. 

Further, the legislators recommended regulators:

• communicate with banks during the examination process to better understand roles and responsibilities;
• provide clarity in regulating bank-fintech partnerships "to ensure firms can innovate without fear;"
• collaborate to identify gaps in authority instead of overstepping statutory authority; and 
• strengthen communication with state banking regulations, who have critical insight into the exam process.