OCC Highlights Concern Around ‘Siloed’ Banks and Inequality

Michael Hsu, acting comptroller at the Office of the Comptroller of the Currency (OCC) has highlighted concerns around banks becoming siloed as digital technology becomes mainstream.

In a speech to the Exchequer Club in Washington DC last week, Hsu said that banking was being “disintermediated” by fintechs, technology platforms, crypto and decentralized finance — similar to how financial regulatory agencies were siloed during the financial crisis of 2007-09.

A “coordination among all financial regulators” was needed, Hsu said, which would ensure a “level playing field” and “limit regulatory arbitrage”.

The comptroller said that the “perpetuation of inequality” was also a key problem for both society and trust in the banking system, with strengthening and modernizing the Community Reinvestment Act “one part of the solution”.

However, addressing “credit invisibles” — which equate to 45 million Americans without a credit score — improving access to affordable housing, increasing credit availability to minority-led and small businesses, as well as supporting and revitalizing depository institutions was also required.

Hsu also highlighted his concerns around “high-cost debt traps” that perpetuate inequality, with buy-now-pay-later programs seen as a particular concern.

He highlighted that no-fee or low-fee Bank On accounts could help “reduce inequality and build trust with consumers”. In May the Bank On initiative was hailed as a success by the American Bankers Association.

In August, the OCC chief warned banks against complacency as he urged bank leaders to be “especially vigilant” in the post-pandemic era.

In May, the acting comptroller laid out four key priorities for the OCC focused on solving “urgent problems” that affected the agency’s mission to ensure a safe, sound, and fair banking system.