Financial regulatory agency pushes for enhanced record-keeping among technology-based financial collaborators
The Federal Deposit Insurance Corporation (FDIC) has proposed new rules aimed at strengthening banks' oversight and risk management related to fintech partnerships. This move comes in the wake of the collapse of Synapse, a middleware provider that connected fintechs to financial institutions.
The proposed rules aim to increase transparency and control surrounding fintech collaborations. Banks will be mandated to maintain more rigorous and transparent recordkeeping of fund flows, custodial responsibilities, and operational controls. This is to mitigate risks tied to third-party service providers and ensure compliance with the Bank Secrecy Act (BSA), anti-money laundering (AML), and Know Your Customer (KYC) obligations.
Chair Martin Gruenberg stated that the rule is an important step to ensure banks know the actual owner of deposits and can provide the depositor their funds if the third party fails. The rule also seeks to ensure timely access to customer funds in the event of a fintech collapse, even if the bank partner is still standing.
The FDIC's proposed rule is a response to ongoing risks in the fintech-bank interface and recent fintech collapses. The Synapse collapse, which resulted in millions of dollars in frozen customer funds, highlighted the critical need for robust recordkeeping, fund flow transparency, testing, and communication protocols between banks and their fintech partners.
In addition to the fintech recordkeeping proposal, the FDIC and other federal agencies issued a joint statement in July 2025 on crypto-asset safekeeping risk-management. While this statement does not create new supervisory expectations, it reinforces the importance of a strong control environment in fintech-related services.
Bank mergers will also face tougher scrutiny under a policy update approved by the FDIC board. The proposed rule will now consider concentrations beyond deposits, including small business and residential loan originations, when evaluating a merger's competitive effects. The FDIC may now review deals that result in an institution of $100 billion or more in assets with additional scrutiny.
Acting Comptroller of the Currency Michael Hsu, also an FDIC board member, stated that the policy update clarifies factors each agency takes into account when reviewing mergers, serving as yardsticks and roadmaps for banks. The measure also allows for oversight by the banks' primary federal regulator to review for, and compel, compliance with the rule.
The rule proposed by the FDIC supersedes an existing measure last updated in 2008 and is related to a 2021 executive order by President Joe Biden heightening scrutiny of competition in American industry. The 2021 executive order noted that federal agencies had "not formally denied a bank merger application in more than 15 years."
A public comment period on the proposal will be open for the next 60 days. Vice Chair Travis Hill and director Jonathan McKernan spoke out against the update, with McKernan believing the final proposal reflects a bias against mergers and Hill stating the revised approach adds unpredictability.
Michael Hsu, however, stated that the policy update serves as yardsticks and roadmaps for banks, clarifying factors each agency takes into account when reviewing mergers. He emphasised that regulators must be open to embracing and improving mergers where strong banks seek to acquire weaker ones. Hill also expressed concerns about the impact of the policy update on rural areas with a small number of banks.
The FDIC's proposed rule is a significant step towards ensuring the safety and transparency of fintech partnerships and mergers in the banking sector. It underscores the FDIC's commitment to addressing gaps in current compliance frameworks and ensuring robust risk management controls in the digital age.
- The FDIC's proposed rule focuses on increasing transparency and control surrounding fintech collaborations, requiring banks to maintain rigorous and transparent recordkeeping of fund flows.
- The rule seeks to ensure timely access to customer funds in the event of a fintech collapse, even if the bank partner is still standing, thus mitigating the risks of third-party service providers.
- In addition to the fintech recordkeeping proposal, the FDIC and other federal agencies issued a joint statement in July 2025 on crypto-asset safekeeping risk-management, emphasizing the importance of a strong control environment in fintech-related services.
- Bank mergers will now face tougher scrutiny under a policy update approved by the FDIC board, with the proposed rule considering concentrations beyond deposits and evaluating a merger's competitive effects more carefully.
- The FDIC's proposed rule underscores the commitment to addressing gaps in current compliance frameworks and ensuring robust risk management controls in the digital age, particularly addressing the safety and transparency of fintech partnerships and mergers in the banking sector.
