Which Federal Regulator is Toughest on Baas?

Contributor: Konrad Alt

Who’s been toughest on fintech partner banks recently – the OCC, Federal Reserve, or FDIC?

It’s no secret our federal banking regulators have been directing a spectacular level of enforcement attention at fintech partner banks in recent quarters.  But are some worse than others?

The charts below break out the data by regulator.  The differences are interesting.

Since the beginning of 2023, 25.6% of the FDIC’s formal enforcement actions have gone to fintech partner banks (10/39).  In two of the last five quarters, including 1Q24, fintech partner banks accounted for fully half of the FDIC’s formal enforcement activity.

During the same period, 22% of the OCC’s formal orders went to fintech partner banks (5/23).  But they’ve all come in just the last two quarters: two in 4Q23 (28% of OCC formal orders); and three more in 1Q24 (43%).

The Fed’s overall level of formal enforcement activity during this period is almost the same as the OCC’s (22 vs. 23), but only three of its orders (14%) involved fintech partner banks, two in 3Q23 and one the following quarter.

Now, of course, these agencies also differ in the number of banks and fintech partner banks they each regulate.  By our count, the numbers of fintech partner banks regulated by the FDIC, OCC, and Federal Reserve are 68, 48, and 33, respectively.

Putting it all together, if you were a fintech partner bank, your odds of getting tagged with a formal enforcement action these past five quarters were:

Who’s been toughest on fintech partner banks recently – the OCC, Federal Reserve, or FDIC?

It’s no secret our federal banking regulators have been directing a spectacular level of enforcement attention at fintech partner banks in recent quarters.  But are some worse than others?

The charts below break out the data by regulator.  The differences are interesting.

Since the beginning of 2023, 25.6% of the FDIC’s formal enforcement actions have gone to fintech partner banks (10/39).  In two of the last five quarters, including 1Q24, fintech partner banks accounted for fully half of the FDIC’s formal enforcement activity.

During the same period, 22% of the OCC’s formal orders went to fintech partner banks (5/23).  But they’ve all come in just the last two quarters: two in 4Q23 (28% of OCC formal orders); and three more in 1Q24 (43%).

The Fed’s overall level of formal enforcement activity during this period is almost the same as the OCC’s (22 vs. 23), but only three of its orders (14%) involved fintech partner banks, two in 3Q23 and one the following quarter.

Now, of course, these agencies also differ in the number of banks and fintech partner banks they each regulate.  By our count, the numbers of fintech partner banks regulated by the FDIC, OCC, and Federal Reserve are 68, 48, and 33, respectively.

Putting it all together, if you were a fintech partner bank, your odds of getting tagged with a formal enforcement action these past five quarters were:

  • 15% if your primary federal regulator was the FDIC;
  • 10% if the OCC regulated you; and
  • 9% if the Federal Reserve was your regulator.

By comparison, if you weren’t a fintech partner bank, your odds of drawing a formal order during the same time period were just 1.8%.