Regulators Move to Rescind Post-Synapse Fintech Risk Guidance

Regulators are moving to withdraw the risk guidance that followed the collapse of Synapse, the banking-as-a-service intermediary whose failure left customer funds in limbo. The step marks a notable shift in how supervisors are approaching bank-fintech partnerships.

That guidance encouraged banks to scrutinize their fintech partners more closely, especially arrangements in which third parties hold or move customer money. Sponsorship deals of that kind underpin much of the consumer fintech industry, letting nonbanks offer deposit and payment products through chartered institutions.

Alongside the rescission, officials are laying the groundwork for a standards organization that would set shared expectations for these relationships. Supporters argue a common framework could bring consistency to areas such as reconciliation of customer balances, safeguarding of funds and oversight of intermediaries, rather than leaving each bank to interpret scattered guidance on its own.

The direction has drawn interest from both sides. Fintech firms and their bank partners may welcome clearer, more uniform rules, while skeptics are likely to question whether loosening the earlier guardrails reduces protections for consumers. Much depends on the details still to come, including who would sit on the new body and how its standards would be enforced.