OCC Issues Responsible Innovation Framework: New Guidance Clarifies OCC’s Intended Approach Towards Regulating Innovation in the Financial Sector and Creates New Office of Innovation

Sullivan & Cromwell LLP - November 1, 2016

On October 26, 2016, the Office of the Comptroller of the Currency, the regulator of federally chartered national banks and savings associations, released its Recommendations and Decisions for Implementing a Responsible Innovation Framework, which sets forth a number of specific actions that the OCC will implement when evaluating innovative financial products, services and processes and their associated risks.  The OCC Framework, which builds on the OCC’s previously released white paper on supporting responsible innovation in the federal banking system, represents the most extensive effort by a U.S. federal financial regulator to provide guidance for financial institutions and companies regarding the development of products and services in the financial technology (“FinTech”) sector.  It consists of five core components: (i) establishing an outreach and technical assistance program for banks and nonbanks; (ii) conducting awareness and training activities for OCC staff; (iii) encouraging coordination and facilitation; (iv) establishing an innovation research function; and (v) promoting interagency collaboration.  In addition, the OCC announced that it will establish a new Office of Innovation which will be headed by a Chief Innovation Officer and will be tasked with implementing the OCC Framework and serving as the OCC’s central point of contact and clearinghouse for requests and information related to innovation.

While not specifically addressed in the OCC Framework, the OCC also announced that it is continuing to assess whether to grant special purpose national bank charters to nonbank financial technology companies, and that it plans to publish a paper later this year that discusses the issues associated with establishing such a charter.