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December 9, 2020 | Legal Advisory

On December 7, 2020, several bank and credit union trade associations (collectively, the “Associations”)[1] submitted a joint letter (the “Letter”) to the Office of the Comptroller of the Currency (the “OCC”) opposing the national bank charter application submitted by Figure Bank, N.A. (“Figure Bank”), which is a wholly-owned subsidiary of blockchain-based fintech company Figure Technologies, Inc. (“FTI”). FTI is seeking a national bank charter for Figure Bank to avoid regulation as a bank holding company and eliminate dependence on state licensing – thus streamlining its regulatory oversight – and is seeking to do so by utilizing a new national bank charter model that would accept only uninsured deposits. The Associations oppose this charter model and assert in the Letter that the approval of such an application is unlawful and could have severe consequences for the banking system.

The Associations present several arguments in the Letter, chief among them being that a national bank cannot take deposits without federal deposit insurance. Such a charter would violate federal law, Congressional intent, and public policy. Specifically, Section 2 of the Federal Reserve Act requires federally chartered banks to be FDIC insured. Further, Acting Comptroller of the Currency Brian Brooks (the “Comptroller”) does not have the legal authority to interpret this statute. 

The Associations argue that the plain meaning of Section 2 mirrors Congressional intent dating back to the Great Depression and mandates FDIC deposit insurance for national banks in order to prevent destabilizing bank runs. To grant Figure Bank an uninsured national bank charter would allow future banks to similarly decline deposit insurance, resulting in reduced regulatory oversight and increased systemic risk.

It is unclear whether the OCC will grant the Associations’ request to postpone consideration of Figure Bank’s application until after the OCC has solicited and evaluated public comments and consulted with other federal regulatory and enforcement agencies. It also unclear whether the incoming Biden Administration would endorse the OCC’s novel national bank charter given the legal and systemic issues raised in the Letter.

[1] The Associations include the American Bankers Association, the Bank Policy Institute, the Consumer Bankers Association, the Credit Union National Association, the Independent Community Bankers of America, the National Association of Federally-Insured Credit Unions, and The Clearing House.

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