The Office of the Comptroller of the Currency [1] is making innovation a priority, and according to OCC head Thomas J. Curry, big banks, credit unions, and regulators need to, too.
In his speech [2] at the American Banker Retail Banking Conference in Las Vegas today, Comptroller of the Currency Thomas Curry spoke to the importance of innovation in the financial services industry–especially amidst the constantly changing technological environment.
“The reality is that the environment in which financial institutions operate is changing,” Curry said. “It’s changing quickly, and for the most part, it’s changing for the better. Businesses and consumers expect more from financial institutions, and technology opens the door to products we couldn’t have imagined even a decade ago, let alone in 1995.”
He listed innovations like mobile banking, online card activation and deactivation, and income-smoothing services as just a few of the advances that have changed the industry in recent years.
Comptroller of the Currency Thomas Curry
“The reality is that the environment in which financial institutions operate is changing. It’s changing quickly, and for the most part, it’s changing for the better. Businesses and consumers expect more from financial institutions, and technology opens the door to products we couldn’t have imagined even a decade ago, let alone in 1995."
Comptroller of the Currency Thomas Curry
And though he was speaking to retail bankers from across the nation, Curry made sure to note that it’s not just banks that can innovate.
“I see national banks and federal savings association embracing change and, in many cases, leading it. But regulated banks aren’t the only show in town when it comes to financial services,” Curry said. “After all, technology has made it possible for nonbank companies to offer an array of bank-like services without the necessity of a single brick-and-mortar branch.”
He also said that, while the OCC encourages innovation, those innovations must be executed responsibly and in a way that minimizes risks.
“Innovation often involves taking on unfamiliar risks,” Curry said. “Banks engaged in responsible innovation need to strike the right balance between providing benefits to consumers and businesses with sound risk management.”
Curry also cautioned bankers against the urge to not innovate–to stay static.
“Not every innovation is appropriate for a regulated financial institution, and not every innovation that is appropriate for a regulated institution is appropriate for all regulated institutions,” he said. “But avoiding new approaches completely is equally dangerous.”
Regulators play a big role in preventing that, he said.
“Banks have to continuously adapt in order to prosper,” Curry said, “and we, as regulators, have to be knowledgeable enough to understand new technology and nimble enough to render timely decisions on matters requiring regulatory approval, as well as guidance about our supervisory expectations.”
The OCC is prepared to do just that, according to Curry. Currently, the OCC is developing a framework to support and evaluate innovation in the industry. This framework will be based on eight principlesd: Supporting responsible innovation; fostering an internal culture receptive to innovation; leveraging internal experience and expertise; broadening access to financial services through innovation; ensuring safety and soundness in innovation; encouraging banks of all sizes to innovate; promoting ongoing dialogue about innovation through outreach; and collaborating with other regulators.
Curry got more specific about how the OCC would handle outreach and collaboration.
“To stay abreast of changes in the market and changes in technology, the OCC will engage in an ongoing way with technology providers, banks and others,” he said. “We also intend to sponsor events such as ‘innovator fairs’ to bring together banks and nonbank innovators with OCC experts to discuss regulatory requirements and supervisory expectations and ensure a clear understanding of the financial services regulatory environment.”
The basis for the OCC’s innovation framework, as well as details on all eight principles, was recently published in a white paper, “Supporting Responsible Innovation in the Federal Banking System [3].”