Joseph Chisolm, Director for Accume Partners offer key highlights from the recent OCC decision to accept National Bank Charters from Fintech Companies.

On July 31, 2018, the Office of the Comptroller of the Currency (OCC) announced it will begin accepting applications for a special purpose national bank (SPNB) charter from financial technology (fintech) companies that engage in banking activities and meet the standards applicable to national banks.  Under OCC rules, “SPNB” is defined as a national bank that engages in a limited range of banking activities, including one of the core banking functions, but does not take deposits and is not insured by the Federal Deposit Insurance Corporation (FDIC).

Further, the OCC asserts its statutory authority under the National Bank Act (Act) to grant charters for national banks to conduct the “business of banking.”  Under the Act, the OCC has interpreted the “business of banking” to encompass any of the three core banking functions of receiving deposits, paying checks, or lending money and does not require the bank to take deposits within the meaning of the FDIC; hence, FDIC insurance would not be required.

In its decision, the OCC believes that making SPNB charters available to qualified fintech companies would foster responsible innovation and provide a framework of uniform standards and robust supervision to help ensure they operate in a safe and sound manner and fairly serve the needs of consumers, businesses, and communities. In evaluating applications from fintech companies, the OCC will be guided by three threshold principles:

  • The OCC will not allow the inappropriate commingling of banking and commerce.
  • The OCC will not allow products with predatory features nor will it allow unfair or deceptive acts or practices.
  • There will be no “light-touch” supervision of companies that have an SPNB charter. Any fintech companies granted such charters will be held to the same high standards that all federally chartered banks must meet.

As part of its decision, the OCC believes an SPNB charter would permit fintech companies to take advantage of the benefits afforded to national banks and would allow fintech companies to avoid burdensome state licensing requirements for lending activities and money transmission.

The application process is described more fully in the OCC’s Policy Statement on Financial Technology Companies’ Eligibility to Apply for National Bank Charters (July 31, 2018) and Comptroller’s Licensing manual Supplement, Considering Charter Applications From Financial Technology Companies (July 2018). 

Key highlights from the Supplement are as follows:

  • All applicants for a national charter must submit a comprehensive business plan to the OCC which describes the applicant’s proposed activities, clearly defined market that the applicant plans to serve, a description of the applicant’s risk management framework, the applicant’s internal system of controls, and a copy of the applicant’s risk assessment (list not exhaustive).
  • As part of the application process, the OCC will coordinate with other regulators to facilitate consideration of any applications or approvals required by those regulators.
  • Fintech companies that receive SPNB charters will be supervised like similarly situated national banks.
  • The SPNB will be subject to the minimum leverage and risk-based capital requirements that apply to all national banks.
  • The SPNB will be required to describe funded sources and how it will maintain sufficient liquidity under stressed conditions.
  • An SPNB will be required to develop a contingency plan to address significant financial stress that could threaten the viability of the bank.
  • The SPNB will be subject to heightened supervision initially, similar to other de novo banks.
  • Any entity seeking an SPNB charter will need to demonstrate a commitment to financial inclusion that includes providing or supporting fair access to financial services and fair treatment of customers.
  • The OCC will have the authority to supervise and unwind a fintech company that becomes a national bank in the event that it fails.

It remains to be seen how fintech companies and state regulatory agencies will ultimately react to the OCC’s decision. For instance, will the compliance regime that will come with obtaining a national license be viewed as too burdensome and costly? How will the OCC’s decision impact the many fintech companies that have formed partnerships with traditional financial institutions? Will fintech partners/parents support the SPNB? Will the OCC face an onslaught of lawsuits from state regulatory agencies who argue that the OCC does not have the statutory authority to grant licenses to non-depository banks? Answers to these questions will play out in the ensuing months and years.

About the Author

Joseph Chisolm is a compliance professional with over 15 years of regulatory compliance experience in the areas of BSA/AML/OFAC requirements, financial investigations, corporate governance standards, enterprise risk management, risk-based audits and compliance reviews for large domestic and foreign financial institutions. He is considered a subject matter expert in assessing the adequacy of an organization’s internal control environment. If you have any questions, please contact Joseph at 646-872-1967 or email him at

About Accume Partners

Accume Partners is a trusted advisor that assists clients by delivering integrated risk, regulatory, and cybersecurity solutions to help manage uncertainty and drive business value.  We focus on both emerging and established financial services, commercial and education sectors.  We have over 25 years of experience, a local and national presence, and advise over 500 clients.  Read the About Accume Magazine: