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OCC Issues Updated Procedures for Termination of Federal Charters
On June 7, the OCC released Bulletin OCC 2017-20 announcing a revised booklet covering termination of federal bank charters. The booklet, part of its Comptroller’s Licensing Manual, replaces “Termination of National Bank Status,” issued in April, 1998, and applies to all national banks and federal savings associations. According to the Bulletin, these are the highlights of the revised booklet:
- “provides an overview of policy considerations and evaluative factors that the OCC considers when reviewing notices to terminate a bank”;
- “outlines requirements and procedures that a bank should follow when completing the process to terminate, either through a merger, conversion, or liquidation, including completing related filings and notices”;
- “lists references and links to informational resources, sample forms, and documents that a bank may find useful during the termination process”;
- “incorporates revised regulatory requirements for terminating a bank.”
Updates include termination procedures and requirements from after July, 21 2011, when the Office of Thrift Supervision and the OCC were integrated.
OCC Issues Revised Comptroller’s Licensing Manual Booklets
On May 8, the OCC announced the release of a revised Fiduciary Powers booklet of the Comptroller’s Licensing Manual, which replaces the version issued in June 2002, and applies to all national banks and federal savings associations proposing to exercise fiduciary powers. This revised booklet incorporates updated procedures and requirements following the integration of the Office of Thrift Supervision (OTS) into the OCC in 2011 and the revisions to 12 C.F.R. § 5 (effective July 1, 2015), which address applications for national banks and federal savings associations proposing to exercise fiduciary powers. Specifically, the revised booklet addresses the: (i) policies and procedures to guide a bank in submitting a request to exercise fiduciary powers or submitting a notice to the OCC that it is exercising fiduciary powers in a new state; and (ii) procedures for a bank to surrender its fiduciary powers and for the OCC to revoke those powers. The booklet also lists references and links to informational resources to assist applicants during the filing process.
That same day, the OCC also released a revised Public Notice and Comments booklet of the Comptroller’s Licensing Manual, which replaces the version updated in March 2007. This revised booklet incorporates public notice and comments procedures and requirements that were updated following the integration of OTS into the OCC, and the issuance of revised 12 CFR Part 5, and applies to national banks and federal savings associations, unless otherwise noted, as well as federal branches and agencies of foreign banks. In particular, the booklet addresses the “general requirements related to the public notice process, impact of Community Reinvestment Act (CRA) performance on certain applications or notices (filings), application of the convenience and needs standard under the Bank Merger Act, and requirements and procedures for conducting public hearings, public meetings, and private meetings.”
OCC’s March Fintech Guidance Documents Draw Range of Comments, Reactions from Stakeholders
Back in December of last year, the OCC announced its intention to move forward with developing a special purpose national bank charter for financial technology (fintech) companies. In an accompanying white paper the OCC outlined the basis for its authority to grant such charters to fintech companies and potential minimum supervisory standards for successful fintech bank applicants. And, as previously covered by InfoBytes, in March, the OCC released a Draft Licensing Manual Supplement for Evaluating Charter Applications From Financial Technology Companies (“Draft Fintech Supplement”) and a Summary of Comments and Explanatory Statement (“March 2017 Guidance Summary”) (together, “March 2017 Guidance Documents”) in which it provided additional detail concerning application of its existing licensing standards, regulations, and policies to fintech companies applying for special purpose national bank charters. With the comment period for its March 2017 Guidance Documents closing earlier this month, the bank regulator drew a range of reactions from stakeholders, several of which are described below:
Center for Responsible Lending (CRL). In its comment letter—submitted on behalf of a number of consumer, civil rights, small business, and community groups—the CRL argued, among other things, that “the OCC does not have the legal authority to charter non-depositories,” and “is not a substitute for critical safeguards that exist at the state level,” and that the existence of a national bank charter for non-depository fintech institutions would likely result in the preemption of strong state laws. The signers expressed concern that, in its approval process, the OCC “has completely failed to address critical consumer and small business protection requirements.” The letter adds that the chartering process, as it now exists, “seems more designed to pick winners and losers and grant special privileges to established players in the industry than to facilitate innovation.”
Mercatus Center at George Mason University (Mercatus Center). In its comment letter, the Mercatus Center set forth its position and belief that the OCC’s current proposal “shows some improvement over its previous statements,” but “remains overly focused on the survival of the entity instead of the protection of customers.” According to Brian R. Knight, a Senior Research Fellow at the Mercatus Center, the proposal imposes requirements and conditions on special purpose national banks (SPNBs) “that many will find impossible to meet—without a sufficient countervailing benefit.” Knight recommends therefore, that the OCC, among other things: (i) reorient charter requirements away from insisting that SPNBs demonstrate survivability and toward ensuring that they can fail in an orderly manner that protects their customers; and (ii) clarify the requirements for SPNBs to obtain and maintain a charter consistent with the rights and responsibilities of national banks under relevant law.
Consumer Bankers Association (CBA). In an April 14 comment letter, the CBA argued that the OCC "has not provided a clear rationale or justification for offering a national bank charter to fintech companies,” and that the standards for such banks are not yet fully developed.” The group urged the OCC to conduct an in-depth study of the fintech sector to determine whether or not the public would benefit from a fintech charter.
Independent Community Bankers of America (ICBA). As previously covered by InfoBytes, the ICBA has been a vocal opponent of the OCC’s fintech charter efforts throughout the agency’s nearly yearlong process. Reiterating concerns raised in its January 17 comment letter, the ICBA submitted another comment letter on April 12, calling upon the OCC to rescind the proposed licensing manual supplement and request specific congressional authorization to grant fintech charters. Specifically, the ICBA asserted the need to spell out clearly the supervision and regulation that these chartered institutions and their parent companies would be subject to. The ICBA noted its observation that federal agencies “are inconsistent on how they define a ‘bank’ or what constitutes the ‘business of banking,’” and argued the benefits of giving Congress the “opportunity to define the business of banking and consider all the policy implications of issuing a fintech charter.” In particular, the ICBA insisted that the OCC publish liquidity and capital requirements for fintech firms that would be the same as those applied to depository institutions. The ICBA also issued a statement concerning a lawsuit filed April 26 by the Conference of State Bank Supervisors CSBS against the OCC (see related InfoBytes Special Alert), in which the organization “commend[ed] the CSBS for elevating this issue and remains deeply concerned with the OCC’s proposed fintech charter, which the agency has pursued without congressional authorization or a formal rulemaking process subject to public comment.”
American Bankers Association. In an April 14 letter, the ABA expressed its support for the OCC’s proposed charter, so long as “the same rules and oversight are applied consistent with those for any national bank.” The ABA emphasized, among other things, the benefit of a bank charter as a “clear signal to customers that they are dealing with a trusted partner,” as “[t]he title of ‘bank’ carries significant weight in the mind of customers and should not be taken lightly.”
Marketplace Lending Association (MLA). In its April 13 comment letter, the MLA called for the OCC to “consider developing metrics that are different from those used for traditional depository institutions.” Specifically, the MLA argues, “[i]instead of applying rigid capital and liquidity requirements across the board, the OCC should consider implementing requirements that are based on basic prudent operations, long-term profitability, and risk factors that would apply” to fintech firms with different business plans or structures.
Financial Innovation Now (FIN). Finally, in a letter sent earlier this month to the Senate Banking Committee (FIN)—an “alliance of leading innovators promoting policies that empower technology to make financial services more accessible, safe and affordable for everyone”—offered several policy recommendations in response to the legislators’ request for proposals to grow the economy. Among the recommendations offered, was a call for a “Financial Innovation National Strategy” to foster innovation, job creation, and competition in the financial services sector. As part of that strategy, the FIN letter outlines six policy proposals: (i) statutory designation of an Undersecretary of Treasury for Technology; (ii) federal money transmitter laws; (iii) payment technology assessments under the Card Act; (iv) consumer data access protections; (v) better federal regulatory coordination; and (vi) flexible approaches to new tech entrants.
Special Alert: OCC Issues Highly-Anticipated Guidance for Evaluating Charter Applications from Fintech Companies
On March 15, 2017, the Office of the Comptroller of the Currency (OCC) issued further guidance regarding how it will evaluate applications by fintech companies to become Special Purpose National Banks (SPNBs). In its release, the OCC summarized the more than 100 comments it received in response to its December 2016 white paper and provided a draft supplement to the OCC Licensing Manual outlining proposed requirements for fintech companies to become SPNBs.
Last week’s release is the latest in the OCC’s efforts to support the intersection between banking and technology companies. In August 2015, Comptroller Thomas Curry announced the OCC’s intent to assemble a team of policy experts, examiners, attorneys, and other agency staff to begin researching innovative developments in the financial services industry. In March 2016, the OCC published a summary of its initial research and plans to guide the development of responsible financial innovation. In September 2016, the OCC issued a notice of proposed rulemaking clarifying the framework and process for receiverships of national banks without FDIC-insured deposits. That proposal applied to all non-depository national banks, including those with special purpose national bank charters. In October 2016, the OCC detailed its plans to implement a responsible innovation framework and announced the establishment of the Office of Innovation, a dedicated, central point of contact for fintech companies as well as requests and information related to innovation. Finally in December 2016, the OCC published a white paper announcing its intent to create a SPNB charter for fintech companies and invited comments and posed discrete questions for consideration regarding the proposals.Click here to read full special alert
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If you have questions about the guidance or other related issues, visit our Financial Institutions Regulation, Supervision & Technology (FIRST) and FinTech practice pages for more information, or contact a Buckley Sandler attorney with whom you have worked in the past.
OCC Releases Draft “Licensing Manual Supplement” to be Used for Evaluating Fintech Bank Charter Applications; Will Accept Comments Through April 14
On March 15, the OCC released both a Draft Licensing Manual Supplement for Evaluating Charter Applications From Financial Technology Companies (“Draft Fintech Supplement”) and a Summary of Comments and Explanatory Statement (“March 2017 Guidance Summary”) (together, “March 2017 Guidance Documents”) in which it provides additional detail concerning application of its existing licensing standards, regulations, and policies in the context of Fintech companies applying for special purpose national bank charters. The Draft Fintech Supplement is intended to supplement the agency’s existing Licensing Manual. The March 2017 Guidance Summary addresses key issues raised by commenters, offers further explanation as to the OCC’s decision to consider applications from Fintech companies for an Special Purpose National Bank (“SPNB”) charter, and provides guidance to Fintech companies that may one day wish to file a charter application.
The March 2017 Guidance Documents emphasize, among other things, certain “guid[ing]” principles including: (i) “[t]he OCC will not allow the inappropriate commingling of banking and commerce”; (ii) “[t]he OCC will not allow products with predatory features nor will it allow unfair or deceptive acts or practices”; and (iii) “[t]here will be no “light-touch” supervision of companies that have an SPNB charter. Any Fintech companies granted such charters will be held to the same high standards that all federally chartered banks must meet.” Through its commitment to (and alignment with) these principles, the OCC “believes that making SPNB charters available to qualified [FinTech] companies would be in the public interest.”
Notably, the OCC emphasized that its latest Fintech guidance “is consistent with its guiding principles published in March 2016” and “also reflects the agency’s careful consideration of comments received (covered by InfoBytes here) on its December 2016 paper discussing issues associated with chartering Fintech companies.” As covered in a recent InfoBytes Special Alert, the OCC has, over the past several months, taken a series of carefully calculated steps to position itself as a leading regulator of Fintech companies.
Finally, although it does not ordinarily solicit comments on procedural manuals or supplements, the OCC will be accepting comments on the aforementioned Fintech guidance through close of business April 14.
OCC Issues Updated Guidance for Managing Bank Premises and Equipment
On November 29, the OCC announced the release of a revised Bank Premises and Equipment booklet of the Comptroller’s Handbook. The revised booklet, which replaces the booklet of the same title issued in March 1990, applies to examinations of all national banks and federal savings associations engaged in the acquisition, management, and disposal of bank premises and equipment. According to the accompanying OCC Bulletin, the revised booklet incorporates updated statutory and regulatory citations and revised examination procedures since the integration of the Office of Thrift Supervision into the OCC in 2011. The bulletin explains that the booklet also replaces the "Investment in Bank Premises" booklet of the Comptroller’s Licensing Manual and the "Fixed Assets" section of the former Office of Thrift Supervision Examination Handbook.
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