Ripple Comments on OCC Paper

The OCC is the primary regulator of federal and state-chartered thrift institutions. Image: Shutterstock

Ripple recently submitted a comment letter in response to a paper by the OCC (the Office of the Comptroller of the Currency) on exploring special purpose national bank charters for fintech companies, which was announced on December 2, 2016.  In the paper, the OCC explores its chartering process and supervisory standards for special purpose national banks in light of advances in fintech and evolving customer needs.  Our comment letter commends the OCC for the transparent and deliberate way it is exploring the possibility of granting national bank charters to fintech companies, and we strongly support the OCC’s continued focus on reducing regulatory uncertainty and facilitating responsible innovation.  

Our comment letter is available here.

In our letter, we encourage the OCC to take a balanced supervisory approach that is also flexible enough to clearly and coherently keep pace with a fast-changing financial services industry.  

We believe that appropriately tailoring the chartering process and supervisory standards to create the right balance is critical to enabling responsible innovation to thrive. As institutions develop and implement innovative products and services, they must assess and appropriately manage corresponding risks; at the same time, it is important that regulatory and supervisory expectations not impose undue burdens on innovations capable of providing sustained benefits for customers, businesses, and the broader financial system. Moreover, the supervisory approach should be sufficiently flexible to keep pace with an increasingly complex financial sector landscape, evolving risks, and the emergence of diverse financial innovations that yield public benefit in genuinely novel ways. We therefore commend the OCC’s willingness to appropriately tailor and adapt supervisory requirements to remain current and responsive to evolution in the financial services industry.

We also offer three recommendations:

  • Financial inclusion:  As the OCC fine-tunes its chartering process and supervisory expectations to promote financial inclusion, we encourage it to take into consideration the diversity of innovative ways that fintech companies can contribute to financial inclusion.
  • The ongoing transformation in customer preferences:  Given the scale of transformation we continue to witness in customers’ financial services preferences, we believe the OCC’s chartering process and supervisory standards should support responsible innovation that prudently adapts to these changing needs.
  • Risk-based proportionality:  We believe that a risk-based, proportionate supervisory approach would allow the OCC to appropriately tailor its standards and expectations to account for differences in business models and facilitate diverse innovation, while at the same time even-handedly applying robust safety and soundness principles.

As the OCC has noted, other avenues remain for a fintech company to pursue innovation in this space — a fintech company may, for example, opt to partner with existing banks rather than become a bank itself.  

Even so, the OCC’s policy, regulatory, and supervisory decisions — as well as its coordination with other regulators and supervisors — will have a lasting impact on the development and implementation of new financial innovations.  We believe that with a balanced and appropriately tailored supervisory approach, we can achieve our shared goals of promoting socially beneficial innovation, ensuring that risks are understood and managed, and sustainably expanding access to financial services.