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The US FDIC's FinTech Enforcement

The US FDIC's FinTech Enforcement

by Starling Insights

Starling Insights Editorial Board

May 17, 2024


In a recent op-ed published in the Wall Street Journal, Jeb Hensarling, a former Chairman of the US House Financial Services Committee, criticized what he sees as the US Federal Deposit Insurance Corporation's (FDIC) efforts to "expand its authority to target banks that work with financial-technology companies."

Financial Technology (FinTech) companies are at the forefront of innovation in the financial services sector. "Yet Washington bureaucrats typically don't welcome innovators, whose companies threaten their power," Hensarling argued.

Since January 2023, more than 25% of the FDIC's enforcement actions have targeted banks with fintech partnerships, while such banks occupy a much smaller percentage of all banks that operate in the US. "It's difficult to read these statistics and conclude that the FDIC isn't trying to bully banks through consent orders and 'cease and desist' demands," Hensarling wrote. "In doing so, the FDIC is engaged in de facto rulemaking while bypassing the notice and public comment period legally required under the Administrative Procedure Act."

The FDIC's "assault on fintechs" may be an attempt to distract from the culture crisis plaguing the agency, he speculated, which came to a head last week when the FDIC released the independent report by Cleary Cleary Gottlieb. 

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