OCC’s Hsu: Bank-Fintech Relationships Are “Here To Stay”
A major U.S. bank regulator said that his caution on banks working with fintechs is not intended to hinder these arrangements, but rather reflects his worry that businesses must assess their risks correctly.
Michael Hsu, the acting Comptroller of the Currency, told Reuters in an interview that authorities may be investing too much time and effort on considering cryptocurrencies, at the cost of determining how to appropriately regulate other forms of financial technology.
“Look, bank-fintech partnerships, they’re here to stay. I’m not trying to do away with them,” Hsu said that on Wednesday. “This is the future, so let’s do the future right.”
Banking on Fintech
Hsu said last month, in statements that raised eyebrows across the financial services sector, that the Office of the Comptroller of the Currency has noticed collaborations between banks and fintechs expanding at “exponential rates” and getting ever more complicated.
“My strong sense is that this process, if left to its own devices, is likely to accelerate and expand until there is a severe problem or even a crisis,” Hsu commented at the moment.
In a letter issued to the OCC chairman on Tuesday, House Republicans challenged Hsu’s remarks, arguing that the technical innovation enabled by bank-fintech cooperation has helped banks to reach neglected clients.
Hsu noted on Wednesday that his issue about banks and fintechs teaming together is the chance that duties for risk management might become muddled when various organisations, often with different objectives, share tasks.
“When everything is done within a bank, we know exactly who is accountable when things break,” he said. “When you start chopping these things up … and the business models are different, that’s when risk can get lost.”
Hsu said that the appropriate regulatory approach to fintech collaborations is still unclear, as agencies try to have a better understanding of the many challenges at play and then select which authorities to use.
Overweight Crypto
Regarding bitcoin, Hsu expressed concern that legislators in Congress and regulators are overreaching to the cost of other sectors.
“We’re spending too much time on crypto,” he said. “It’s interesting, it has thorny issues… but relative to other technology and banking issues, I think we’re now kind of overweight crypto.”
Numerous government organisations, including the OCC, the Securities and Exchange Commission, and the Treasury Department, as well as President Joe Biden’s executive order, have focused their attention on the fast emergence of cryptocurrencies and associated products such as stablecoins.
Members of Congress are juggling various bills to provide a regulatory framework for cryptocurrencies.
Hsu noted, however, that since so many officials are concentrating on just one aspect of new financial technology difficulties, other, more important concerns for banks may be overlooked.
“Crypto is just occupying a lot of brain space for an awful lot of people, both on [Capitol] Hill and the regulatory community,” he said. “The persistence of the occupation of brain space, it’s starting to worry me now that we’re not spending that time and attention on some other things.”
