Comptroller Gould’s Stance on Fintechs Seeking National Trust Charters
Jonathan Gould, the Comptroller of the Currency, has recently defended the Office of the Comptroller of the Currency’s (OCC) increasingly favorable approach to fintechs applying for national trust bank charters, despite opposition from some traditional banks.
According to Gould, the fintechs and crypto firms applying for national trust charters represent a positive development for the banking industry because it would bring these nonbank competitors onto an equal regulatory footing. This view is based on the fact that the OCC oversees dozens of trust banks, which have traditionally played a niche role. However, some of the largest digital asset firms, such as Coinbase, Silicon Valley-backed Erebor, and Paxos, are among those seeking trust charters.
Addressing the Concerns of Traditional Banks
Some banks have expressed concerns that granting fintechs trust charters could allow them to take deposits from the public without offering the same level of regulation or customer protections, such as deposit insurance. Gould responded to these concerns by emphasizing the need to reverse the stagnation in the banking industry that has been apparent since 2008. He stressed the need for a return to historic norms around applications.
According to Gould, “We have a frozen banking system, and that’s gone on way too long. I’m very intent on trying to address that and reverse course and return to kind of historic norms around applications.”
The OCC’s History With Trust Charters
The OCC began exploring special-purpose charters in 2016 and, under then-acting Comptroller Brian Brooks in 2020, examined the legal and practical groundwork for a proposed “payments charter.” This exploration laid the foundation for the agency’s Letter 1176 in 2021, which was written by Gould, who was then OCC’s Chief Counsel. This letter interpreted the law as allowing trust banks to engage in “activities that are non-fiduciary in nature, such as non-fiduciary custody” under certain circumstances.
Striking a Balance Between Regulatory Certainty and Supervisory Discretion
When asked about his approach to refocusing the bank supervisory process on material risks, Gould emphasized the need to ensure that bank supervision remains effective over time and is put on a firmer legal foundation going forward. He highlighted the need to address some evident shortcomings in bank supervision over the last few years and refocus supervision on material financial risks.
He also addressed the concern that focusing on certain core solvency parameters might allow other risks to accumulate in the banking system. He explained that even if small risks accumulate over time, they will eventually manifest as a material financial risk.
Considering National Trust Charter Applications
Gould made it clear that the OCC would continue to consider applications for National Trust Charters from fintech and crypto firms. He stated that the OCC has been chartering and supervising national trust banks for decades and reiterated his support for de novo chartering.
He also pointed out that the only way he could attempt to hold nonbank entities to the same standard as banks is if these entities voluntarily apply for a charter and live up to the OCC’s supervisory standards.
Addressing the Issue of Debanking
Gould acknowledged that debanking has been a significant issue in the current administration. He noted that the OCC is currently working on determining the scale of the problem and distinguishing between instances of “bad” debanking (for political or non-financial reasons) and ordinary customer drop-offs.
Concerns About the Rise of Stablecoins
Lastly, Gould addressed concerns about the rise of stablecoins resulting in deposit flight or impacting banks’ core deposits. He stressed the OCC’s commitment to ensuring the upside potential of stablecoins while mitigating any potential downside. He also underscored the need for public feedback during the proposal process to inform the OCC’s implementation of the GENIUS Act.
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