Republican lawmakers say to ‘dismantle’ FDIC’s Office of Technology

bloomberg news

WASHINGTON — Republican leaders on the House Financial Services Committee are preparing to send a letter questioning changes to the Federal Deposit Insurance Corporation’s “innovation” arm, according to a draft letter first obtained by American Banker. That’s what it means.

Last year, the FDIC completely revamped its FDITech office, which was established in 2019 under former Chairman Elena McWilliams. Fostering a more welcoming environment for banks to embrace changes in financial technology.

According to a September report from the Government Accountability Office, the FDIC will eliminate parts of the agency’s mission focused on fostering innovation in January 2023, and will now focus on technology adoption within the FDIC. I’m leaving it there. The office was reorganized as a branch within the agency’s Information Technology Division and no longer focuses on external competition and innovation within the Financial Services Division (GAO). report Said.

Republican leaders on the House Financial Services Committee said they are concerned about the direction the FDIC is taking toward innovation, as evidenced by the changes to the Office of Innovation.

In a letter the lawmakers plan to send Friday, House Financial Services Committee Chairman Patrick McHenry (North Carolina), Financial Institutions and Monetary Policy Subcommittee Chairman Andy Barr (Kentucky), Digital said French Hill (Arkansas), Chairman of the Subcommittee on Assets, Financial Technology, and Inclusion. He said the FDIC under the Biden administration has “rolled back innovation.”

“We are also concerned that there is no public information detailing how the FDIC’s stance on innovation will manifest in its review,” the lawmakers said.

Republicans said the agency “has a troubling history of using extrajudicial pressure to achieve anti-corporate outcomes.”

“We are concerned that the FDIC’s approach could be used, including within the review process, to discourage the development of innovative products and services that benefit consumers and businesses,” they wrote. Stated.

The letter follows a number of enforcement actions by the FDIC aimed at bank-fintech partnerships and increased scrutiny by federal regulators of banking-as-a-service.

In November, the FDIC ordered the First Bank of Washington to take a series of far-reaching steps. Primarily to allege unsafe or unsound banking practices related to certain fintech relationships and to enforce compliance controls related to the delivery of banking-as-a-service. At the beginning of last year, The FDIC similarly slapped Cross River Bank in New Jersey with a consent order.alleged that it engaged in unsafe or unsound banking practices in relation to fair lending regulations.

Along with the FDIC, Office of the Comptroller of the Currency, and the Federal Reserve. Final guidance tightening standards for banks wishing to partner with fintechs was decided in June. This is done by requiring banks to implement risk management practices that take into account the risks of third-party providers such as consultants, merchant payment processors, cloud computing providers, and data aggregators.

In a letter, the lawmakers asked the FDIC to identify all financial institutions that have received any enforcement actions stemming from third-party relationships with fintech companies, and to request FDIC headquarters to provide them with information regarding third-party relationship risk management. It asked for all information to be sent to the regional office. With fintech.