Bank Regulators Issue Warnings On Fintech and Banking As Disasters Pile Up
Last Thursday, the Board of Governors of the Federal Reserve System (the Fed), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), the federal supervisors of banks, issued 11 pages of warnings on what could go wrong when federally-insured banks get in bed with uninsured and untested financial technology companies. These financial technology companies are lovingly called Fintechs on Wall Street and in Silicon Valley where big money can be made by venture capitalists who bring the sexy-sounding Fintech startup as an IPO (Initial Public Offering) to investors on Wall Street. The Wall Street firm, in return, gets a nice payday in underwriting fees and a law firm also gets paid as counsel to the underwriters.
Federal banking regulators have been in a frenzied scramble to deal with the growing fallout of disastrous marriages between Fintech and federally-insured banks.
Then there is the mess with the Fintech payment app, Zelle. Things are so bad with that app that the U.S. Senate’s Permanent Subcommittee on Investigations had to hold a hearing on May 21. The Chair of that Subcommittee, Richard Blumenthal, opened the hearing with this:
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Warning from FED. See blow:
