🔎 BaaS Partnership in Regulatory Focus

Last week, Blue Ridge Bank named a new president for its fintech division. It makes perfect sense to bring in someone with direct BaaS partnership supervisory experience.

The community bank signed a restrictive agreement with OCC over its fintech partnership practices last August. That turned out to be the beginning of a series of regulatory drumbeats around the BaaS partnership model.

📌 Sep ‘22: In a conference speech, the OCC chief Hsu expressed his concern over the bank-fintech arrangements - if unchecked, which could lead to a systemic risk similar to the 2008 subprime crisis.

📌 Nov ‘22: the US Treasury published a 128-page report on the impact of nonbank firms’ entry into consumer finance.

It recommended regulators provide a clear and consistently applied supervisory framework for bank-fintech relationships.

📌 Dec ‘22: Fed officials Michael Barr (Democratic) and Michelle Bowman (Republican) both voiced that the growing nonbank financial activities should be brought within the Fed’s regulatory authority.

There are not many issues that can gain consensus between the Democrat and the Republican.

The message is loud and clear.

Being prudent should be a core principle for a financial operator anyway.

Is any concrete regulation coming for BaaS partnership model?

Certainly something to watch in 2023.