From CNBC: 2024-09-17 10:52:15

The FDIC proposed a new rule requiring banks to keep detailed records for customers of fintech apps after Synapse’s failure left thousands locked out of their accounts. The rule targets accounts opened by fintech firms partnering with banks, ensuring better record-keeping to protect depositors in case of emergencies.

Fintech apps often pool customers’ funds into a single large account at a bank, managed by either the fintech or a third party. The lack of complete, accurate records in such arrangements poses risks for customers, as seen in the Synapse collapse impacting over 100,000 users of fintech apps like Yotta and Juno.

To address the issues highlighted by the Synapse situation, the FDIC aims to improve record-keeping to facilitate quicker payout to depositors in the event of a bank failure. Despite the fact that FDIC insurance doesn’t cover losses from fintech provider failures, enhanced records would aid in determining rightful payouts during bankruptcy proceedings.

The proposed rule, awaiting approval by the FDIC board, would undergo a 60-day public comment period if passed. Separately, the FDIC announced a revised policy on bank mergers, intensifying scrutiny on consolidations, particularly those resulting in banks with assets exceeding $100 billion. Critics argue that more mergers could create stronger competition for major banks like JPMorgan Chase.

Read more: FDIC rule would make banks keep fintech customer data after Synapse debacle