By Hannah Lang
(Reuters) -A high U.S. banking regulator on Tuesday proposed that banks bolster recordkeeping necessities for accounts held by fintech firms on behalf of their clients, following the collapse of bank-fintech intermediary Synapse Monetary Applied sciences earlier this yr that led to the freezing of hundreds of accounts.
Taken collectively, the brand new necessities would be certain that shoppers have well timed entry to their funds, even within the absence of a financial institution’s failure, the Federal Deposit Insurance coverage Corp stated.
Underneath the FDIC’s proposal, banks that work with fintech firms would want to establish the helpful house owners of every account and its stability. Third events — like Synapse — could be allowed to take care of these information so long as sure necessities are met, comparable to a financial institution retaining unrestricted entry to that information even within the occasion of a intermediary’s chapter or insolvency.
Synapse filed for chapter in April, resulting in the freezing of accounts for purchasers of its associate banks, together with Tennessee-based Evolve Financial institution & Belief, which in flip labored with fintech firms to supply banking providers like deposit accounts.
It’s nonetheless unclear how many individuals had accounts frozen because of Synapse’s chapter, however regulators have estimated that it could possibly be as excessive as tens of hundreds. A court-appointed trustee within the chapter case claimed in June that there’s an $85 million shortfall between Synapse’s associate banks and what depositors are owed.
The FDIC on Tuesday additionally finalized a coverage that may carry heightened scrutiny to financial institution mergers that may lead to a mixed financial institution with greater than $100 billion in property. The ultimate rule is mostly much like the FDIC’s March proposal.
The brand new rule would replace the company’s merger steering for the primary time in 16 years, and would put particular emphasis on sustaining the soundness of the banking sector, company officers stated when first proposing the rule in March.
Financial institution mergers and trade consolidation have come below intense scrutiny since final yr, when three of the largest-ever U.S. financial institution failures resulted in acquisitions and billions in losses for the FDIC’s insurance coverage fund.
