OCC Lends Perspective on Responsible Innovation

OCC Fintech

Last week, the OCC published a whitepaper titled, “Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective.” The whitepaper reports on the OCC’s vision for responsible innovation in the federal banking system with emphasis on the concept that when managed appropriately “risk should not impede growth.” The paper provides a preliminary framework for how the OCC intends to improve its evaluation of innovative products, services, and processes identified as having potential associated risks and requiring regulatory approval. According to the paper, the rapid pace at which fintech companies are expanding provides both opportunities – with some banks investing in and partnering with leading fintech companies – and challenges for national banks and federal savings associations. The paper noted that, “[t]hrough strategic and prudent collaboration, banks can gain access to new technologies, and nonbank innovators can gain access to funding sources and large customer bases.” In order to guide the agency’s approach toward regulating and evaluating innovations within the financial services space, the OCC formulated the following eight principles: (i) support responsible innovation; (ii) foster an internal culture receptive to responsible innovation; (iii) leverage agency experience and expertise; (iv) encourage responsible innovation that provides fair access to financial services and fair treatment of consumers; (v) further safe and sound operations through effective risk management; (vi) encourage banks of all sizes to integrate responsible innovation into their strategic planning; (vii) promote ongoing dialogue through formal outreach; and (viii) collaborate with other regulators. The paper concludes with posing questions and soliciting feedback on its evolving framework for understanding and evaluating innovation. Comments on the paper are due by May 31, 2016 and should be sent to innovation@occ.treas.gov.