Odd Lots The OCC’s Michael Hsu on the Big Risks Facing Banking Businesses Right Now
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Nov 9, 2023 Michael Hsu, the Acting Comptroller of the OCC, brings his extensive expertise to discuss the recent collapse of Silicon Valley Bank and Silvergate Bank. He delves into the challenges posed by new technologies like crypto and banking-as-a-service, highlighting significant regulatory concerns. Hsu emphasizes the importance of adapting regulations to ensure the safety and accountability of banking partnerships. The conversation also tackles the future of lending and the balance between centralized and community-focused banking in a rapidly evolving landscape.
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OCC's Historical Role
- The OCC, founded in 1863, addressed the chaotic free banking era where each bank issued its own currency.
- This led to confusion, fraud, and instability, mirroring some of today's stablecoin issues.
Crypto Parallels to Pre-2008 Derivatives
- Michael Hsu expresses concern about the rapid growth and hype around crypto, reminiscent of the derivatives market pre-2008.
- He emphasizes the importance of due diligence and control for banks engaging in crypto.
Tokenization vs. Crypto
- Tokenization of assets and liabilities offers a solution to settlement problems, unlike crypto which primarily focuses on speculation.
- It streamlines the process by combining messaging and settlement, reducing friction and costs.
