Fintech Banking Charters and Quantum Computing
Last week, two interesting events occurred that impact the financial services industry: one involving a legal battle and the other potentially “revolutionary.”
We’ll start with the legal battle.
Last week, a federal court sitting in New York vacated the Office of the Comptroller of the Currency’s rule to accept applications for “fintech” national banking charters. The decision resulted from a lawsuit brought by the New York State Department of Financial Services (“DFS”) against the Office of the Comptroller of the Currency (the “OCC”), alleging that the OCC had exceeded its authority when adopting its rule. The OCC’s rule created a “special purpose national bank charter” for financial technology companies, even though such institutions would not accept deposits. In May 2019, the court denied the OCC’s motion to dismiss DFS’ case and determined that the National Bank Act, in "plain language" as well as when read in the context of “history and legislative context,” provides the OCC with the authority to issue national bank charters only to institutions that accept deposits.
Based on that decision, the OCC and DFS mutually agreed that the court had resolved the legal issue, thereby making it unnecessary to pursue the matter further. The parties, however, did not agree on the scope of a final judgement. DFS wanted the rule vacated for all applicants, and the OCC wanted the rule vacated only with respect to applicants that “have a nexus” to New York. On October 21, the court sided with DFS and set aside the OCC’s rule “with respect to all fintech applicants.” Yesterday, Joseph Otting, the Comptroller of the Currency, confirmed that the OCC would appeal the decision to the Second Circuit U. S. Court of Appeals. To date, the OCC has not issued any “fintech” national banking charters