“Nasty surprises” may be in store if the growth of the fintech industry is not matched with the same level of oversight, the acting comptroller of the currency has warned.
In a speech at the TCH + BPI Annual Conference on September 7, Michael J. Hsu spoke about how fintechs and the role of big tech warranted more attention from regulators.
Hsu spoke to delegates about the issues the regulator was already monitoring, such as insufficient information security controls and change management resilience.
Describing these as “known knowns”, Hsu admitted there may be issues in the fintech industry that only become apparent to regulators at a critical juncture.
“I worry increasingly about the ‘unknowns’ and am concerned that the less familiar risks of this digital transition are unlabeled and thus unseen,” he said. “As we learned from the 2008 financial crisis, risks that are unseen have a tendency to grow and later to be the source of nasty surprises.”
In relation to banking, Hsu highlighted that banks had done a “commendable job” rebuilding trust since the crisis but warned that this trust was “sensitive” to surprise.
For this reason, Hsu said it is important for banks to be mindful of the potential risks their fintech partners and business models may expose them to.
Hsu explained how the OCC is working to monitor these potential blind spots.
This involves interagency work to improve IT and operational resilience supervision.
He added: “By expanding our aperture, engaging more substantively with nonbank technology firms, and mapping out bank-fintech relationships and risks, we can help ensure that banking remains trusted and safe, sound, and fair as the system evolves.”