- Key insight: Gould reiterated a view that fintechs and crypto firms seeking national trust charters is a positive sign for the banking industry because it will bring more of those nonbank competitors onto an equal regulatory footing.
- Supporting data: The Office of the Comptroller of the Currency oversees dozens of trust banks already, but they’ve had a historically niche role. Today, some of the largest digital asset firms are among those seeking trust charters.
- Forward look: Gould is tasked with reviewing at least a dozen pending trust charter applications from companies such as Coinbase, Silicon Valley-back Erebor and Paxos.
WASHINGTON — Comptroller of the Currency Jonathan Gould Monday defended the OCC’s increasingly open approach to national trust banks for compliant fintechs.
His comments come as some banks have
“I strongly support de novo chartering in this country, and we have sadly … had such a low risk tolerance around charters in this country that you see the results: anemic chartering, which has implications for meeting the credit needs of ordinary Americans all across the country. We have a frozen banking system, and that’s gone on way too long,” he said. “I’m very intent on trying to address that and reverse course and return to kind of historic norms around applications.”
The OCC began exploring special-purpose charters in 2016 and, under then-acting Comptroller Brian Brooks in 2020, examined the legal and practical groundwork for a proposed “payments charter.” Though that initiative never launched, the exploration laid the foundation for the agency’s Letter
“The OCC has been chartering and supervising national trust banks for decades. We have 60 National Trust Bank charters in the system that we supervise, and supervise quite effectively, and they constitute household names,” Gould said.
What follows is a transcript of the interview, edited for clarity and length.
American Banker: You’ve expressed an interest in refocusing the bank supervisory process on material risks. Can you describe that in greater detail and discuss what you see as the optimal balance of regulatory certainty and supervisory discretion?
Jonathan Gould: So I think there’s two main drivers behind — from my point of view — the need for changes to our supervision approaches. So one is, I want to make sure that bank supervision as we know it remains in effect over time, and I want to ensure that bank supervision is put on a firmer legal foundation going forward. So if you look at just the developments over the last few years, there are changes in administrative law that are immediately relevant to the deference that the courts give agencies like ours. Changes in agency deference [are] coupled with — simply — more judicial scrutiny of agency actions. That, I think — that’s just a reality of the landscape, that’s not going to change.
And if you look at our approach to things, like unsafe and unsound conditions and practices, there are a number of circuit court decisions — both in the D.C. Circuit, in the Fifth Circuit and elsewhere — that put parameters around what are unsafe and unsound conditions and practices, which, I’m not sure that in all cases we have … necessarily been following, just historically. So I think we have some legal vulnerabilities that we need to shore up to ensure that supervision continues to exist as it has in the past.
The second reason I think we need to focus on supervision is because there have been some evident shortcomings in bank supervision over the last few years — and beyond, but certainly over the last few years. And in particular, the lessons that I drew from the Silicon Valley Bank failure — obviously, first and foremost, primary responsibility is with bank management. However, bank supervision — both California and the Fed, who are the supervisors there — seemingly did not see this coming, or seemingly were taken unawares. I base this on the reporting that the Fed did a couple years ago now, the report that they issued, where they kind of diagnose events leading up to it and so forth. But they fundamentally failed to grasp or to identify or to do anything about what was kind of the most glaringly obvious material financial risk sitting there in plain sight on the bank’s balance sheet, and they didn’t do anything about it. And so based on what I see as a shortcoming of supervision, I am very focused — as I think some of my banking agency peers are — [in] making sure that we are once again focused on material financial risks, because those are the things that we can absolutely not afford to miss going forward.
So what I’m intent on doing is not weakening supervision, but refocusing supervision on what actually matters, so that when we give a message to a bank, we direct them to the things that matter most, and we have clear standards and clear time frames in which they need to address those things and remedy those things.
Both bank management and bank boards have finite resources, and if a bank or a management has been tasked with responding to — I’m making this number up, but, you know, 30 plus different [matters requiring attention] — that’s a problem, right? Because, again, surely not all 30 of those MRAs are as important as one another, and not all of them necessarily are going to go to material financial risk, which will be the proximate cause of a bank failing. So again, the goal of focusing on material financial risks is to make sure our supervision is no longer diluted, and in an effort to kind of be everything to everyone, fails to address the things that most matter and that are the proximate causes of a bank failure.
AB: Is there a risk that in triaging supervision to focus on certain core solvency parameters, you may be allowing other risks to accumulate in the banking system?
Gould: You can think about the causal chain of how a bank fails, or what’s most likely to pressure it. We don’t have the greatest track record of identifying the specific risk vector that’s going to cause stress to a bank. You know, it might manifest several years out in this area. It might manifest several years out in some other area, but where it’s last going to appear and where it will actually threaten the bank is somewhere in that material financial risk. Again, we cannot afford to miss those things.
By definition, the way banks will ultimately fail — if it’s going to fail — is through that pressure on the material financial risks. So, yes, over time, things can accumulate — but they will still manifest themselves as a material financial risk. So it’s not an either/or situation. Even if it’s a bunch of small things that perhaps aren’t being observed three years in advance, [if] they keep building up, keep building up, they’re still ultimately going to manifest as a material financial risk at that bank.
AB: There are a number of National Trust Charter applications pending at the OCC from fintech and crypto firms — applications that some lawmakers and banking industry groups have pushed back against. Can you describe your general approach to considering these applications and what risks you foresee in approving them?
Gould: Let me speak about kind of applications broadly, and then I’ll kind of move more specifically into National Trust bank applications and kind of our approach generally. So first of all, I’m just going to give you this — this is a sheet of paper which shows de novo applications [Gould produces a tally of de novo applications by year from 1990 to 2025]. The point I want to make is, we have interest in charters of all different types, including national trust banks — that’s a return to the historic norm. What has been extraordinary has been the past, say, 10-15 years. And just look at the numbers. I mean, look at what happened post-2008, and then look at what it was in the 1990s and 2000s. So to be clear, I strongly support de novo chartering in this country, and we have, sadly, put in place policies, or just had such a low risk tolerance around chartering in this country that you see the results: anemic chartering, which has implications for meeting the credit needs of ordinary Americans all across the country, because there are fewer and fewer de novos, and we have a frozen banking system, and that’s gone on way too long, and I’m very intent on trying to address that and reverse course and return to kind of historic norms around applications.
So National Trust Bank Charters. So just for awareness’ sake, the OCC has been Chartering and supervising national trust banks for decades. We have 60 national track Trust Bank charters in the system that we supervise — and supervise quite effectively, and they constitute household names. And again, it’s public, the identities of the National Trust banks we supervise. And I think if you looked at the list, you would find any number of National Trust Bank charters that represent a wide range of business activities and banking activities that they are engaged in — in some cases, very important to our nation’s economy, and, again, household names.
In terms of current interest in National Trust Bank charters, and people [thinking] you should stop doing them, we have statutory factors that Congress has told us to apply. We will do so to the best of our ability. If Congress wants to change those statutory factors, that’s their prerogative, but unless and until they do, those are the statutory factors that we have, and we have a job to do. We charter, regulate and supervise banks, including national trust banks, and so if an applicant comes to us and the applicant thinks that it can meet the statutory factors, and live up to our supervisory standards, well, you know, we’re going to make a case by case determination whether we think that’s the case in fact, and if they do they can be get a preliminary, conditional approval. If they don’t, they’ll be denied.
AB: You wrote the
Gould: It’s true that I wrote the letter, but your characterization of the letter is incorrect.
AB: Would an application that was filed before that letter have been accepted if the proposed business model included non-fiduciary activities?
Gould: So again, your characterization of the letter, I think, is incorrect. I’m not the chief counsel anymore, so if you want to have a follow up with the chief counsel to discuss the legal merits of that interpretive letter, I will say that interpretive letter is entirely consistent with statute. I’m not aware of any statutory changes that have rendered that interpretive letter somehow wrong on a legal basis, but I’m not wearing the chief counsel’s hat anymore so you’re more than welcome to follow up with him.
AB: You’re considering these applications, and as you said, you’re looking into the statute and what the bounds of the statute require. Are there other characteristics of these applications, in a general way, that raise any concerns for you?
Gould: In a general way — no. You know, on the contrary, one of the concerns that I hear — which is a policy concern, not a legal concern, again, I’m not the chief counsel — one of the policy concerns that I hear from folks, including from some within the banking industry, have been concerns about … an
There’s nothing I can do about nonbanks. I don’t have any jurisdiction — the OCC has no jurisdiction. It may be that in some future Congress they choose to change the regulatory framework, and that’s fine — that’s their prerogative. So the only possible way that I could even attempt to hold a nonbank to the same standard as I would a bank — or a national bank, in this case from a federal banking system. You know, OCC’s perspective is, if that entity voluntarily comes and tries to subject themselves to bank standards, meaning they try to actually get a charter from us — again, I’m not saying all of them, they’re going to meet the statutory factors to live up to our supervisory standards — but that is the [prerequisite] condition … to the OCC even attempting to put them on an equal footing. So when I hear concerns about on an unlevel playing field, but then the same people voicing the concerns about an unlevel playing field also then say, ‘Oh, but, but you should, as a matter of policy, never let these people in the system,’ I’m kind of left in a very difficult situation.
AB: What is the change that the interpretive letter made then, policy-wise, if it didn’t open the door to trust banks participating in nonfiduciary activities?
Gould: It didn’t make a change, it did not make a change in the statute or the law.
AB: Right, but what was the change to OCC policy?
Gould: To clarify the actual OCC’s view of the statute and what the statute said, which I think there was a lack of clarity around.
AB: Debanking has been a
Gould: In terms of the scale, that is something that we’re working on right now. I completely agree, one of the challenges in formulating appropriate policies and so forth around debanking is just getting a better sense of the size and scope of it. That is what we are doing,
I think there are plenty of examples where individuals or corporate entities have been debanked — and it has been clear, in some cases, because the bank engaging the debanking has publicly stated that they are debanking the person for various kind of political reasons — or, let’s just say non-financial reasons. In most cases, I think it’s not hard to tell you know what is debanking for political or religious reasons or merely because a customer is engaged in an otherwise lawful business activity, versus a debanking situation when it’s done for business judgment, where [for example] you’re a small bank, and you don’t know how to estimate or price or value some natural resource locked in the ground, and so as a matter of business, they just they can’t engage in those activities because they couldn’t do it with any kind of competence. We were also working with the federal banking agencies as well as main Treasury around providing more clarity around the BSA/AML space.
AB: Many banking lawyers have said banks have no obligation to serve anyone who’s not in a protected class. How do you respond to somebody who says, ‘Look, banks don’t have to serve anyone, right’?
Gould: We’re still in the process of taking a look at the nine largest national banks that we supervise and looking at the kind of decisions they’ve made over the last few years. In some cases, we can simply look to the bank’s stated motivation for debanking a particular customer, or type of customer, because they made a press release about it and said why they were doing it — so that’s pretty clear why they’re doing. In other cases it’s going to be less clear. We’re letting kind of the supervisory process work its way to try to figure out what was actually going on here.
AB: There’s a lot of talk and concern about the rise of stablecoins resulting in deposit flight or impacting banks’ core deposits. How concerned are you about that possibility and how does that inform your
Gould: I obviously appreciate that people do have concerns. There have been a lot of studies reporting this or that [level of impact]. I think there’s kind of probably a range of predictions made in various studies, depending on who commissions them. I don’t pretend to know what the outcome will be. From my perspective, if payment stablecoins did over time result in material deposit outflows or significant outflows, with respect to a subset of the banking system, that would certainly be a source of concern to the other federal bank agencies as well — not to mention elected officials.
I’m here to ensure the safety and soundness of the banking system. If there are material outflows of deposits, that raises concerns to me about the safety and soundness of the banking system. I think in general, my approach is we want to kind of ensure the upside potential of stablecoins is realized through our own and the other regulators’ GENIUS Act implementation process, while mitigating against any potential downside. We will, in due course, produce a proposal, or proposals, at least for that kind of subset of the federal payment stablecoin issuer that Congress has tasked us with implementing. We will really look forward to informed comments from the public at large so that we can again try to maximize the upside potential to customers and to the system at large and payment system while mitigating any kind of downside risks, including the one that you mentioned, like deposit flight.
AB: In anticipation of those comments, do you have thoughts about how real a concern deposit flight is?
Gould: I’m not going to anticipate those comments. I’m going to let the proposal process work out. You know, there’s times when agencies issue proposals and they already have kind of a clear idea of what direction we want to [go]. I think this is a situation where we’re going to issue a proposal and we really very much welcome — and I would say even need — feedback from the public at large.