Fed Advisory Council Urges Scrutiny of Fintechs Seeking Payments System Access
May 26, 2021
Members of the Federal Reserve’s Community Depository Institutions Advisory Council—which includes several ABA member bank CEOs—raised concerns about the growing number of nonbank competitors seeking to offer banking products and services while circumventing the traditional regulatory structure, according to minutes released on Friday by the Fed.
“Regulations exist for a reason; they protect consumers and other financial institutions that provide services and conduct transactions as counterparties,” council members noted. “When one segment of the industry is allowed to operate under fewer rules that provide economic gain to that segment at the cost of greater counter-party and systemic risk, the overall financial ecosystem is placed at greater risk.”
The groups also raised concerns about an increase of special purpose charter applications by novel financial firms, and emphasized that the Federal Reserve should “carefully review any applications to the payments system from nontraditional, more lightly regulated financial institutions.” Read the meeting minutes.