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  • Frank Tian

๐Ÿ”Ž 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.


๐Ÿ“Œ Sep โ€˜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.


๐Ÿ“Œ Nov โ€˜22: the US Treasury published a 128-page report on the impact of nonbank firmsโ€™ entry into consumer finance.


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


๐Ÿ“Œ Dec โ€˜22: Fed officials Michael Barr (Democratic) and Michelle Bowman (Republican) both voiced that the growing nonbank financial activities should be brought within the Fedโ€™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.

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