On October 26, 2016, the Office of the Comptroller of the Currency (OCC) announced it would establish a framework for “responsible innovation.” The agency said it would establish an Office of Innovation to implement a framework to improve its ability to identify, understand, and respond to financial innovation affecting the federal banking system. The full recommendations are available here.

The move follows moves by international regulators, such as those in the UK, Singapore, Hong Kong and Australia to provide some kind of framework, or even a “safe space” for financial technology firms and banks implementing new technologies to test innovative products and services, such as distributed ledger technology (blockchain), digital currencies, streamlined payment transfers or marketplace lending.

The OCC supports responsible innovation that enhances the safety and soundness of the federal banking system, treats customers fairly, and promotes financial inclusion.

– Comptroller of the Currency Thomas J. Curry.

The Office of Innovation would have staff located in Washington D.C., New York and San Francisco. Although the framework does not provide a full-blown “safe space” or “regulatory sandbox” that would provide a safe harbor from consumer protection requirements, it does contemplate a voluntary pilot program that would facilitate adoption of new solutions and the enhancement of risk management by permitting testing and discovery with agency involvement before a full-scale commitment and rollout of technologies. In addition, the framework’s objectives include:

  • establishing an outreach and technical assistance program for banks and nonbanks,
  • conducting awareness and training activities for OCC staff,
  • encouraging coordination and facilitation,
  • establishing an innovation research function, and
  • promoting interagency collaboration.

The OCC expects the new office to begin operations in first quarter 2017. The OCC refrained from making a decision on whether to provide special purpose national bank charters for non-bank financial technology companies, a prospect which it continues to evaluate. The agency plans to publish a paper later in 2016 seeking comment on possible limited-purpose charters targeted toward non-bank fintech firms.