Treasury Report on Financial Innovation Reflects MBA Priorities

A recent Treasury report identifies improvements to the regulatory landscape designed to better support nonbank financial institutions, promote embrace of financial technology and foster innovation. The report mirrors a number of long-standing priorities and principles advocated by the Mortgage Bankers Association.

That is no accident. The report (—Nonbank-Financials-Fintech-and-Innovation.pdf) reflect months of work on MBA’s part to improve the regulatory landscape for members by removing barriers to adoption of technology solutions that lower costs, improve efficiency and enhance customer experiences.

“The report shows welcome engagement from Treasury and directs the government’s regulatory priorities and the future of the mortgage market,” said Justin Wiseman, MBA Associate Vice President and Regulatory Counsel. “It’s very gratifying to see many long-standing MBA priorities reflected in the report, and we look forward to working with the relevant stakeholders in implementating these recommendations.”

The Treasury report is the fourth in response to President Trump’s Executive Order calling for the identification of laws and regulations that are inconsistent with certain identified core principles of financial regulation. It notes since the financial crisis, there has been a proliferation in technological capabilities and processes at increasing levels of cost effectiveness and speed.

“The use of data, the speed of communication, the proliferation of mobile devices and applications and the expansion of information flow all have broken down barriers to entry for a wide range of startups and other technology-based firms that are now competing or partnering with traditional providers in nearly every aspect of the financial services industry,” the report said.

The report also notes the increasing influence of nonbank financial firms, which play important roles in providing financial services to U.S. consumers and businesses by providing credit to the economy across a wide range of retail and commercial asset classes. “Nonbanks are well integrated into the U.S. payments system and play key roles such as facilitating back-end check processing; enabling card issuance, processing and network activities; and providing customer-facing digital payments software,” the report said. “Nonbank financial firms also play important roles in capital markets and in providing financial advice and execution services to retail investors, among a range of other services.”

Earlier this year, MBA brought several members–including independent mortgage banks and technology companies–to a meeting with the Treasury Department to discuss marketplace developments and regulatory impediments and challenges. Following that meeting, MBA submitted to Treasury a set of core regulatory principles for enabling financial innovation, along with numerous specific recommendations.

MBA’s principles for enabling financial innovation include recognizing the effects of the diversity of the U.S. financial regulatory system and encourages federal and state financial regulators to coordinate their efforts to ensure innovation pathways are available to all market participants, regardless of charter, license or business model.

Treasury recommendations include the following:

–Adapting regulatory approaches to changes in the aggregation, sharing, and use of consumer financial data, and to support the development of key competitive technologies;

–Aligning the regulatory framework to combat unnecessary regulatory fragmentation, and account for new business models enabled by financial technologies;

–Updating activity-specific regulations across a range of products and services offered by nonbank financial institutions, many of which have become outdated in light of technological advances; and

–Advocating an approach to regulation that enables responsible experimentation in the financial sector, improves regulatory agility and advances American interests abroad.