More data needed to counter narrative linking banking/FinTech relationships to ‘bank runs’ | Nelson Mullins Riley & Scarborough LLP

In a recent press release, Acting Comptroller of the Currency Michael J. Hsu reiterated his support for the FDIC’s Notice of Proposed Rulemaking on Brokerage Deposits. Perhaps most troubling to FinTech/bank partnerships are the continued statements equating FinTech partnerships with “bank runs.”

Let’s be clear… this is not true..

Having worked with some of these banks, and now working with former employees of banks that experienced the 2023 bank runs, the deposits of FinTech partners were deposits it did NO escape. These FinTech partnerships that held deposits to support neobanks and payment platforms with significant technology infrastructure could not quickly shift those deposits. Imagine any large payment company with significant technology infrastructure embedded in the core of the bank suddenly “shifting deposits” in a bank run. It’s just not gonna happen.

From first-hand experience, these are some of the “stickiest” deposits in a bank. Why these deposits are now being demonized as part of a narrative that links FinTech partnerships to bank runs simply has not been proven by the data or experience of these banks. The comment period on the new brokerage deposit rules has been extended, and we continue to press banks with experience in this space to provide data and statistics that counter this narrative.

Acting Controller Hsu’s statement is available at

“In July, the FDIC issued a Request for Information (RFI) on Uninsured Deposits and proposed amending its rule on brokered deposits to address, among other things, the changing nature of deposits — largely driven by digitization — and the associated risk of faster and more severe bank runs.”

www.occ.gov/…