A New Framework for Innovation in the Federal Banking System

Federal regulatory agencies are often perceived as barriers to innovation, particularly in the financial services sector. However, there are efforts underway to change that perception. Last week the Office of the Comptroller of the Currency (OCC) released a new framework for responsible innovation in the federal banking system. The OCC also announced that it will establish a new office dedicated to implementing this framework while increasing the agency’s ability to understand, monitor, and supervise innovation and emerging trends. The creation of this office and framework signal that the OCC sees the innovation happening in the financial industry and is being thoughtful about its regulatory approach. Commonwealth is excited to see how the OCC’s new approach might create opportunities for innovations that would increase the financial security and opportunity for the financially vulnerable.

The report recommended the creation of a new Office of Innovation and encouraged this Office to:

  • Conduct outreach, including holding events, to understand emerging trends, products, processes, and technologies from a range of industry and community perspectives
  • Take several steps to expand the OCC’s internal capacity to understand, monitor, and supervise innovation as well as to increase coordination among domestic and international regulators as it related to supervising responsible innovation
  • Create an optional new program to support OCC involvement in bank-run pilots (to be developed further)

The steps the OCC is taking can help lay the foundation for a regulatory environment that promotes innovation and facilitates the adoption of tested innovations at scale. This new Office of Innovation could promote needed collaboration and innovation between regulators and financial institutions. Commonwealth believes that government entities like the OCC have a role to play in removing regulatory barriers to responsible innovation and enabling broad access to the financial system. We hope that the OCC’s actions will encourage the banks it supervises, more than 1,500 institutions with over $11 trillion in assets — and set an example for other financial institutions, nonbank financial service providers, and fintech companies — to responsibly pursue and support new ideas that make financial security and opportunity possible for everyone.

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