The story highlights how a push for online financial services, seen as a threat to traditional banks, faces regulatory limits.
New York state’s most senior banking regulator has sued the federal government in a bid to reverse its decision to grant national bank charters to online lenders and payment firms, claiming the move puts consumers at risk, a report said.
Maria Vullo, superintendent of New York’s Department of Financial Services, called the July 31 decision by the Office of the Comptroller of the Currency to let financial technology companies, or fintech firms, obtain charters “lawless, ill-conceived, and destabilizing of financial markets”, Reuters reported.
Vullo was quoted saying that New York could best regulate those markets, but the OCC decision left consumers “at great risk of exploitation” by weakening oversight of predatory lending, allowing the creation of more “too big to fail” institutions, and undermining the ability of local banks to compete.
“The OCC’s reckless folly should be stopped,” Vullo said in her complaint filed in the US District Court in Manhattan.
The matter highlights how the much-touted threat by technology firms to traditional banks faces a threat of its own in the form of regulatory pushback. In recent months, there has been much talk around how “Bigtechs” such as Amazon could compete with banks in some services. In China, e-commerce giant Alibaba’s financial arm Ant Financial is, by some measures, a major wealth management organization. Fintech firms are pushing for nation-wide bank charters so they don’t need separate approvals from each state.
The newswire quoted OCC spokesman Bryan Hubbard saying that the regulator, part of the US Department of Treasury, would vigorously defend its authority to grant national charters to qualified companies “engaged in the business of banking.”