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Banking is one of the most heavily regulated of all industries. Banks that can store deposits and issue loans must hold a certain amount of regulatory capital, they are subject to anti-money laundering laws, and they need to hold charters and licenses and pass certain tests each year. Banks also typically must answer to at least three different regulators.
But while regulation makes it difficult to run a bank, it also serves as a barrier to entry. Lately, that’s been an issue for innovative tech companies that could benefit from becoming a bank.
Recently, Brian Brooks, acting comptroller of the Office of the Comptroller of the Currency (OCC), which regulates national banks, has been paving the way for financial technology companies to clear regulatory hurdles, whether it’s obtaining a banking charter or a national payments charter. The moves by Brooks may be seen negatively by banks, who don’t need any more competition, or positively by fintechs, many of which are fast-moving start-ups frustrated by the extremely slow and mundane regulatory processes they need to overcome to do business. Either way, it’s time for investors to keep an eye on Brooks and the OCC, because it could have implications for their …
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