On December 19th, the Office of the Comptroller of the Currency issued a final rule regarding how it will address receiverships of special purpose national banks which do not have deposits insured by the Federal Deposit Insurance Corporation. While the rule is primarily focused on trust banks, it is clear that the OCC is adopting this rule now as part of its larger plan to begin considering the issuance of special purpose national bank charters to fintech companies. During his December 2nd remarks regarding the OCC issuing fintech charters, Comptroller Curry stressed the importance of the OCC having a formal receivership process for non-insured special purpose national banks.
The OCC published the proposed rule for comment on September 13th and the final rule has been adopted without any changes to the proposal. The rule will become effective on January 19th. A copy of the final rule may be found here
By way of background, the OCC currently supervises 52 uninsured national trust banks. The OCC has not appointed a receiver for an uninsured national bank in over 80 years, since the creation of the FDIC. However, it is curious why the OCC now finds it necessary and timely to clarify the receivership process for uninsured special purpose national banks. The receivership of an uninsured special purpose national bank “would be governed exclusively by the [National Bank Act], the common law of receivers, and the cases applying the statutes and common law to national bank receiverships”. The OCC may appoint any person or entity, including itself or another agency, as receiver, but the receiver will be under the direction of the OCC. The rule itself is mostly technical and process oriented. However, special attention should be paid to the priority of claims provisions which give first priority to the payment of administrative expenses of the receivership. What is different here from an ordinary receivership, is that the OCC as receiver may charge claims against the receivership for the use of its staff and other resources in administering the receivership. This may be significant if the OCC establishes capital requirements that are unusually high for a fintech special purpose charter.
It is noteworthy that this rule is being adopted concurrently with the fintech charter initiative and release of a white paper which contemplates some type of special purpose national bank charter that is in an advanced stage of development. There is an implication that the agency expects the special purpose charter will carry a much higher risk of failure than the historical experience with uninsured national banks. If this is the case, fintech companies contemplating applying for a charter should expect a stringent application review, comprehensive ongoing supervision and significant capital requirements. Just exactly how these will take shape is unknown. What is important to stress is that the OCC does not currently contemplate a rule making procedure before it begins approving special purpose charters. Once it has reviewed the comments to its December white paper (due January 16, 2017) it will move forward with charter approvals.
As the first applications by fintech companies are approved by the OCC, we will have a better idea how OCC policy manifests itself. What is important is that fintech companies considering the advantages of the special purpose national bank charter become more proactive before the OCC policies harden. While there is virtue in not being first, there is the risk that policies and biases will be formed based on the OCC ‘s experience with a competitor.