On July 31, 2020, the Office of the Comptroller of the Currency (OCC) approved the national bank charter application of Varo Bank, N.A., a wholly-owned subsidiary of fintech Varo Money, Inc. The approved application is for a full-service charter, not the OCC’s controversial FinTech charter that is currently the subject of ongoing litigation. In a statement issued after presenting the charter, Acting Comptroller Brian Brooks discussed the value and attributes of a national bank charter, including the ability to operate nationwide under a uniform regulatory framework subject to a single primary prudential supervisor, and the confidence the charter inspires in consumers. Acting Comptroller Brooks stated that Varo Bank’s full-service charter, the first granted by the OCC to a consumer fintech, “represents the evolution of banking and a new generation of banks that are born from innovation and built on technology intended to empower consumers and businesses.”
Acting Comptroller Brooks congratulated Varo Bank leadership and staff, both in his formal statement posted on the OCC website and via a tweet on July 31, 2020: “Congratulations to Colin Walsh and the Varo Money, Inc. team — the first consumer fintech to receive a national bank charter. As other fintechs mature and grow nationally, the message from the federal banking system is: come on in. The water’s fine!”
Varo Bank, N.A.’s application to the FDIC for deposit insurance was approved in February of 2020 subject to conditions that included OCC charter approval, and approval from the Board of Governors of the Federal Reserve System (the “Federal Reserve”) permitting Varo Money, Inc. to become a bank holding company, which the Company reports was received.
As the parent of a full-service national bank, Varo Money, Inc. will be a Bank Holding Company (BHC), subject to Federal Reserve supervision and will be subject to the limits on nonbanking activities contained under Federal Reserve Board Regulation Y and the Bank Holding Company Act of 1956, as amended.
As we have discussed previously, two recent FDIC deposit insurance approvals for proposed fintech-owned Utah industrial banks, and the FDIC’s proposed rule setting forth requirements and conditions it would impose on industrial bank / industrial loan company (collectively, “ILC”) deposit insurance applications, have revived the long-dormant ILC as an alternative for fintechs that wish to own a bank but engage in commercial activities beyond those permitted for BHCs. However, as the Varo Bank N.A. charter demonstrates, eligible fintechs whose activities and ownership structure are permissible for BHCs may elect to pursue an OCC full-service charter option. The OCC and FDIC both continue to demonstrate keen interest in supporting technology and innovation in the delivery of consumer financial services.