A new ICBA blog post says a sudden influx of applications from nonbank financial technology firms for national bank trust charters requires the OCC to change course.
The Path Forward: In the Main Street Matters blog post, ICBA Vice President and Regulatory Counsel Mickey Marshall writes:
An OCC policy shift in 2021 resulted in a flood of applications for national trust bank charters by companies that seek to use the charter to facilitate novel business models related to stablecoins and cross-border payments, which risks allowing an inconsistent regulatory framework that could harm consumers and the broader financial system.
Before deciding on any new national trust bank applications, the OCC should engage in formal rulemaking, as required by the Administrative Procedure Act, to clarify the scope of the permitted nonfiduciary powers of national trusts.
The OCC should ensure its policies are transparent, sound, and fully prepared to account for the unique challenges and concerns posed by digital asset companies and other nonbank fintechs.
ICBA Advocacy: ICBA has strongly opposed nonbank applications because of the risks they pose to consumers and the banking system:
ICBA and other groups recently urged the OCC to postpone the consideration of applications to form Ripple National TR Bank, Fidelity Digital Assets, and others, citing significant policy and legal questions over the applicants’ fiduciary activities and the significant departure from existing OCC precedent that these applications represent.
In a previous letter, ICBA urged the OCC to keep in mind several key principles when considering charter applications from digital asset providers, including their unique risks and need for sufficient supervisory and regulatory safeguards.
In a national news release, ICBA President and CEO Rebeca Romero Rainey noted trust banks are not required to meet the same kinds of regulatory and capital standards that apply to federally insured full-service banks.
ICBA opposed Circle’s application for a national trust bank charter, noting it would allow the proposed First National Currency Bank to offer deposit-like services without adequate regulatory oversight while exposing the banking system to deposit drainage and increased fraud.
