Capitol Comments

Capitol Comments: Comprehensive and Valuable (A Must-Read)

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Each Capitol Comments includes:

  • Joint federal agency issuances.
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Most Recent Capitol Comments:

August/September 2018

OCC Announcements: The Good, the Bad, and the Ugly

There’s been a lot news coming from the Office of the Comptroller of the Currency during the last month. Here’s the good, the bad, and the ugly, in that order: 

The good news was that OCC wants to modernize Community Reinvestment Act regulations to increase lending and expand eligible activities. Comptroller Joseph Otting described updating CRA regulations as one of his near-term goals when he addressed community bankers at ICBA’s Capital Summit in April. 

CRA is too restricted, Otting said at the Capital Summit. “In Maquoketa, IA, the town where I grew up, it used to be that when a bank supported the little league, that was CRA,” he said. “CRA has been narrowed to low-to-moderate-income mortgages and multi-family are really it. We want to broaden the assets that apply.”

As a long-time banker, Otting said he has seen firsthand the benefit of CRA investment and how it makes communities vibrant. “I have also seen how limitations in the current CRA regulation can fail to provide consideration to a bank that wants to lend and invest in a community with a need for capital, including many low- and moderate-income areas,” he said in the OCC’s press release. “It is time for a national discussion on how we can make the CRA work better.”

(There’s a great story on ICBM Members’ investment in rural broadband for their community in our most recent NEWS. Read it here.) 

The bad news from the OCC is that it has begun accepting national bank charter applications from financial technology companies. 

The OCC described the decision as “consistent with bi-partisan government efforts at federal and state levels to promote economic opportunity and support innovation that can improve financial services to consumers, businesses, and communities.” 

Not everyone agrees. John Ryan, president and CEO of the Conference of State Bank Supervisors, called the OCC’s fintech charter “misguided” in a recent AmericanBanker Op-Ed.

“Based on our experience, a federal charter has been most successful at enabling a handful of large, dominant players, as seen in the national banking system,” Ryan wrote. “To believe that a federal fintech charter will encourage innovation, as has been argued, is misguided. That overlooks where financial innovation and competition originate in this country. These come from a system fostered by the states.” 

And now, here’s the ugly news. A fintech called “Varo Bank” announced on Sept. 4 that it’s been granted preliminary approval by the OCC for their application to form a de novo national bank. If it completes the charter process, it will be the first all-mobile national bank in the history of the United States.” 

How does Varo plan to compete with ICBM members? With an all mobile bank- account that’s “built with best-in-class technology wrapped in an intuitive design and user experience,” Varo Bank’s expressed goal is to “lower the cost of banking.” 

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