In a letter sent to Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg, top US House Financial Services Committee Republicans have questioned the shift in focus within the regulator's innovation office, which has signaled a potential backtrack in fostering financial sector innovation.
House Financial Services Committee Chair Patrick McHenry, alongside Subcommittee Chairs Andy Barr and French Hill, expressed concerns about changes to the FDIC's "FDITech" office. The office was created in 2019 to encourage banks to embrace fintech advancements. However, it has seen a significant pivot under the current administration. Moving away from its original mission to promote external financial innovation, the FDITech office now focuses exclusively on technology adoption within the FDIC.
The FDIC has also been active in bringing enforcement actions against bank-fintech partnerships, with notable actions against First Fed Bank and Cross River Bank for practices deemed unsafe or unsound. This regulatory environment, toughened by guidance from other federal agencies, puts banks under pressure to manage risks associated with fintech collaborations more strictly.
"We are concerned that the FDIC's approach could, within the examination processes or otherwise, be used to prevent the development of innovative products and services that benefit consumers and businesses," the Congressmen wrote.
Taken together, the FDIC's seeming retreat from fintech is at odds with many other jurisdictions around the world that are actively encouraging ecosystems that support financial innovation.
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