Rodney E. Hood is the Acting Comptroller of the Currency. Mr. Hood became Acting Comptroller of the Currency on February 10, 2025. As Acting Comptroller of the Currency, Mr. Hood is the administrator of the federal banking system and chief executive officer of the Office of the Comptroller of the Currency (OCC). The OCC ensures that the federal banking system operates in a safe and sound manner, provides fair access to financial services, treats customers fairly, and complies with applicable laws and regulations. It supervises more than 1,000 national banks, federal savings associations, and federal branches and agencies of foreign banks that serve consumers, businesses, and communities across the United States. These institutions range from community banks to the nation’s largest most internationally active banks.
Risk Management in the Fintech Age
While digital assets and innovative products offer the ability to expand banking horizons, financial institutions should adopt a sound risk management framework built on tried and true principles.
Brought to you by Office of the Comptroller of the Currency
*This article appears in the third quarter 2025 issue of Bank Director magazine.
Digital assets and other innovative technologies hold tremendous potential to drive positive and transformative change within the financial services sector. In some areas, that change has already arrived — more than 50 million Americans now hold some form of cryptocurrency, and digital assets continue to represent hundreds of billions of dollars in financial activity. Banks are just beginning to dip their toes into the water with other technologies, such as distributed ledger and generative artificial intelligence.
These innovative products, services and technologies offer the potential to expand the horizons for households and businesses of all sizes, broaden access to the financial system for historically unbanked and underbanked populations and advance prosperity for Main Street America. National banks and federal savings associations are well positioned to implement these products, services and technologies in a safe, sound and responsible manner.
Risk management has long been the backbone of the banking industry. While the technologies employed today are new, the fundamental principles that have served banks well for over a century still apply. These principles include due diligence and approvals; policies, procedures and controls; change management and ongoing performance management.
Due Diligence and Approvals
Banks should clearly understand the rationale for implementing new products, services or technologies and whether doing so aligns with their strategic objectives and risk appetites. This due diligence should be followed by obtaining appropriate approvals.
Policies, Procedures and Controls
Each bank should develop a risk management system tailored to its needs. A sound risk management system properly identifies risk, accurately and timely measures risk, monitors the risk to ensure appropriate review of risk positions and includes appropriate controls.
Change Management
Banks should have effective change management processes to manage the implementation of new or modified operational processes, as well as the addition of new technologies into the bank’s existing technology architecture.
Ongoing Performance Monitoring
Banks should have appropriate performance and monitoring systems to assess whether the new products, services or technologies meet operational and strategic expectations and legal requirements. Banks should also assess whether the new products, services or technologies remain aligned with their strategic objectives and risk appetites.
Since technology is typically not the core business of banks, innovation strategies may entail varying degrees of engagement with third parties. Once again, banks must appropriately manage the risks associated with third-party relationships to protect the interests of the bank and its customers. The risk management principles that bankers have employed over decades of managing outsourcing arrangements are universally applicable to interacting with fintechs.
Existing processes for managing the entire lifecycle of a third-party relationship are just as relevant for fintech partnerships as they are for any other third-party arrangements. Sound third-party risk management and governance processes include oversight and accountability, independent review, and documentation and reporting. This enables a banking organization to minimize financial and operational risks and other adverse consequences. To this end, innovation strategies are not just big IT projects. They should include the range of business unit stakeholders in the banking organization throughout the lifespan of the strategy.
These risk management and governance principles do not prescribe a one-size-fits-all approach. Rather, they are inherently flexible and correlate with the magnitude and complexity of the activity, as well as the criticality of the arrangement to the individual bank offering the product or service. Operating with this principled framework of risk-based governance and controls, banks of all sizes can continue to innovate to meet the changing preferences of households and businesses safely, soundly and fairly.
In a letter to bankers in 1863 when the Office of the Comptroller of the Currency was founded, the first comptroller of the currency, Hugh McCulloch, warned bankers that, “‘Splendid financeering’ is not legitimate banking.” Applied today, McCulloch likely would warn that innovation is not a free pass to abandon risk management.
This advice is as applicable today as it was 162 years ago, and the fundamental risk management and governance principles bankers have employed over the last century and a half will continue to serve them well going forward.
Rodney E. Hood
Rodney E. Hood is the Acting Comptroller of the Currency. Mr. Hood became Acting Comptroller of the Currency on February 10, 2025. As Acting Comptroller of the Currency, Mr. Hood is the administrator of the federal banking system and chief executive officer of the Office of the Comptroller of the Currency (OCC). The OCC ensures that the federal banking system operates in a safe and sound manner, provides fair access to financial services, treats customers fairly, and complies with applicable laws and regulations. It supervises more than 1,000 national banks, federal savings associations, and federal branches and agencies of foreign banks that serve consumers, businesses, and communities across the United States. These institutions range from community banks to the nation’s largest most internationally active banks.