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Fintech charters, CRA and data sharing: FDIC’s McWilliams, OCC’s Otting weigh in

WASHINGTON — Federal regulators gathered Wednesday to discuss the fintech chartering process and some of the biggest challenges deterring the emerging industry from entering the banking space.

Federal Deposit Insurance Corp. Chairman Jelena McWilliams and Comptroller of the Currency Joseph Otting agreed, separately, at a fintech event hosted by the FDIC, that fintechs are having a harder time than expected proving capital and profitability in their business plans when seeking a charter.

They also agreed that the agencies are moving forward jointly on reforming the Community Reinvestment Act, but hedged on when a proposal could be released.

During the event, which covered a lot of ground beyond fintech, Treasury Secretary Steven Mnuchin and McWilliams agreed that they need to address data aggregation at banks and how consumers control their own data, as the FDIC is beginning to study the issue.

Following are highlights from the event:

Bank charter stumbling blocks

The OCC is beginning to see more fintechs apply for a full-service national bank charter — online brokerage Robinhood became the second fintech to apply on Friday. Money servicer Varo Money also has an application with the OCC that has conditional approval pending FDIC approval for deposit insurance (a requirement for the charter).

Both Otting and McWilliams were careful Wednesday not to address any particular applicant, despite being asked about Robinhood specifically. However, both regulators noted that fintechs have generally struggled in proving they can meet the requirements for capital and profitability in their three-year trajectory plans in the applications for any bank charter.

“For fintechs, the issues become the capital because a lot of them have equity but not really capital. And a lot of them are profitable on paper but not really profitable,” McWilliams said. “And the question is: how do you address profitability and capital . . . those are the issues that we’re working through as well when we look at the ILC (Industrial Loan Company) applicants.”

Otting added that the OCC does take into consideration any enforcement action or consumer protection issue tied to the applicant. He was addressing a question about how issues, such as Robinhood’s misstep late last year with the roll out of a new product erroneously marketed as if it would be backed by federal deposit insurance, play into the regulatory thinking for a national bank application.

“We always look at all that activity and try to understand: What was the premise of it and what was the assumption?” he said. “It’s not unusual for a bank to run amiss of . . . certain laws. But often: did they self-report it, what was the remediation, and how quick did they remediate? Those kind of activities are really important to us.”

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