Three Republican Members of House Financial Services Committee express concern over FDIC’s policies on financial technology and innovation
On February 2, 2024, three Republican members of the House Financial Services Committee, including Committee Chairman Patrick McHenry, voiced their concerns over the Federal Deposit Insurance Corporation’s (FDIC) policies on financial technology (fintech) and innovation. In a letter addressed to FDIC Chair Martin Gruenberg, the congressmen highlighted issues such as the FDIC’s recent shift in focus and its potential to hinder the development of new and beneficial financial products and services.
Specifically, the congressmen criticized the FDIC for altering the FDITech Office’s focus from fostering competition and innovation to solely adopting technologies internally. They also raised concerns about the FDIC’s vague stance on innovation during examinations, which could potentially create extralegal pressures and impede the progress of fintech advancements.
To gain a better understanding of the FDIC’s approach towards financial institutions and fintechs, the letter requested specific data and information. The congressmen asked for data on the number of financial institutions that have been issued consent orders or subjected to agreements regarding fintech partnerships since 2021. They also sought clarification on the factors that influence the FDIC’s decision to initiate a bank review.
The letter further requested communications sent to regional offices regarding the management of fintech partnerships since 2021. Additionally, the congressmen sought details on any changes in the enforcement of third-party risk management practices before and after 2020. Lastly, they inquired about the procedures in place to ensure a fair appeals review for financial institutions concerning third-party risk management.
Furthermore, the congressmen expressed interest in learning how the FDIC collaborates with industry participants in the absence of a dedicated innovation office. They requested information on any engagements the FDIC has had with industry players and the nature of those collaborations.
This inquiry comes as the FDIC intensifies its examination of bank-fintech partnerships. The congressmen’s concerns highlight the importance of clear regulatory guidelines to foster innovation within the industry. Responses from the FDIC are expected by February 29, 2024.
Analyst comment
Neutral news. As an analyst, the concerns expressed by the three Republican members of the House Financial Services Committee may lead to a review of the FDIC’s policies on financial technology and innovation. Clear regulatory guidelines will be key in fostering innovation within the industry. The market may experience some uncertainty until the FDIC provides responses to the concerns by February 29, 2024.
