May 09, 2017

John Beaty quoted in American Banker on operating subsidiaries under fintech charter

1 min

Venable partner John Beaty was quoted in a May 9, 2017, American Banker article on the use of operating subsidiaries under a fintech charter. Before passage of the Dodd-Frank Act, many national banks set up operating subsidiaries, partly owned by the banks, which could offer the benefits of preemption to riskier business lines. The proposed fintech charter being offered by the Office of Comptroller of the Currency could effectively bring back operating subsidiaries in all but name.

One issue facing potentially new operating subsidiaries involves examinations, which are typically done jointly with a parent company. "You would have the issue of the subsidiary bank being exposed to its own examination regime," said Beaty.

To help ensure banks benefit fully from preemption, they may opt to have an affiliate obtain a fintech charter that would help them avoid lending limits. "If you have a bank that is under common ownership, with another bank, and the ownership is 80% or [more], then those banks can lend to each other without limits," Beaty added.