Federal Deposit Insurance Corp. (FDIC) Chair Jelena McWilliams wants her agency to reform or issue new guidance on brokerage deposits, artificial intelligence and machine learning, she said Monday at DC Fintech Week.
During a fireside chat with Chris Brummer, faculty director of Georgetown Institute of International Economic Law, the chairwoman acknowledged the FDIC needs to circle back to some issues to fulfill its mandate to maintain stability and public confidence in the financial system.
"I think our regulatory framework in general is ripe for revisiting," she said. "What I told folks at the FDIC when I joined is, 'If we have rules and regulations that we have not touched internally for 10 years or more, open them up to procurement.' … We have opened up a number of different rulemakings to make sure that we don't impede innovation and technology, but create a framework within which they can actually prosper in a responsible manner."
McWilliams cited deposits as an area she wants the regulator to examine.
"The way banks take deposits has changed over time, and our definition of what's a deposit, core deposit, a brokered deposit and the way we look at those has changed because of the delivery channels,” McWilliams said, referencing the growth of digital banking.
McWilliams, who said the FDIC's definition of a brokered deposit hasn't changed in at least two decades, plans to have a proposal out for comment regarding its brokered deposit regulations by the end of the year.
"Banks no longer just collect local deposits," she said. "They have digital channels and different methodologies that they utilize to go above and beyond. And they couldn't do that without technology."
AI and machine learning are two other areas where the regulator plans to issue guidance, McWilliams said.
She described a recent trip to Silicon Valley, during which she asked fintechs for feedback on the kind of guidance banks need in pursuing partnerships.
“So we're working on guidance that we can give to our entities on how to utilize and deal with artificial intelligence or machine learning in their everyday business," she said. "We're going to look at it from a supervisory perspective."
Regulators also need to acknowledge that any guidance that is issued may need to be revisited a year later, McWilliams said.
"We need to be committed to evolving our regulatory framework as the technology evolves," she said.
McWilliams also alluded to a "seal of approval" framework for fintechs with a proven record of meeting certain regulatory requirements.
"One of the questions we got from [fintechs] was, 'After partnering up with 15 to 20 banks, why don't you just give me a 'Good Housekeeping seal of approval,' so I can team up with bank number 21 and not go through the 200 hours of labor-intensive document production?" she said.
McWilliams said it's a concept the FDIC is looking into. "There is something to be done, perhaps, in this space," she said.
She also brought up the FDIC's new Office of Innovation, a pet project of sorts for the chairwoman.
McWilliams created the tech lab last year to grow the adoption of technology at the agency and within the banking system. The program is still seeking its first department head, and McWilliams said she's looking for a disruptor.
"I'm looking for a person who understands technology and will walk into an agency and say, 'Why not?'" she said.
As far as regulatory knowledge, McWilliams said, "We can teach them the regulatory framework."
