Hartford Business Journal

14 HARTFORDBUSINESS.COM | MAY 13, 2024 Banking Circle US CEO Kjeld Olson cuts the ribbon on his company's new Stamford office, alongside Gov. Ned Lamont. PHOTO | CONTRIBUTED Regulatory Modernization CT revives long-dormant banking charter to woo fintech companies By Harriet Jones Hartford Business Journal Contributor W hen Banking Circle US opened its new Stamford headquarters in February, it was no small coup for the state's Department of Banking, welcoming the first new bank in Connecticut in a decade. But it's one that the department hopes to repeat in short order, according to Commis- sioner Jorge Perez, who says he's fielding new inquiries every week from financial technology companies interested in what the state has to offer. "Some of these companies have thousands of employees. The economic impact to the state is going to be unbelievable," Perez said in a recent interview. The game changer for the Land of Steady Habits is a new banking charter — or rather the repurposing of an old one that's lain dormant on the department's books for two decades. When it was first written back in the 1990s it was called an uninsured bank charter — intended for insti- tutions that wanted to offer some financial services but would not take federally insured deposits from the general public. The only company that ever used it back then, according to the department, was UPS. But the seemingly obsolete tool caught the attention of Perez not long after he took over as commissioner in 2015, a time when the fintech industry could not have been hotter. "Even though our primary role is to be a regulator and examiner and make sure that people follow the law," he said, "part of the stra- tegic plan was increased economic opportunities through charter and licensing innovations." And as the industry began to mature, Perez says, it was also looking to engage with regulators like him. "Some of those fintech companies started to realize that it'd be in their best interest if they were regulated because it gave consumers and other people some comfort level that they wouldn't have if there was no regula- tion," he said. Enter the uninsured bank charter. Its existence doesn't make Connecticut wholly unique — several states, including Wyoming, Georgia, Nebraska and Vermont, are using novel charters or other regulatory innovations to woo fintechs — but Perez says he believes Connecticut's is one of the most apt. So far, four fintechs — Banking Circle US, Numisma Bank (formerly Currency Reserve Bank), TNB USA Inc. and Moneycorp Bank US — have formally applied for the charter, Perez said, while others have expressed interest. The process of obtaining and holding the charter includes third-party review, capital requirements, regular examina- tion and compliance with Bank Secrecy Act or money laundering laws. Favorable geography The other huge factor in Connecti- cut's favor when attracting fintechs is its proximity to New York. "As a startup it's important to keep the costs down," said Kjeld Olson, CEO of Banking Circle US. "So, having an office in Stamford will give us access to talent, but also keep our cost at a decent level." Banking Circle US is an indepen- dent sister company of the Luxem- bourg-based Banking Circle, which has been in business since 2013. Its technology supports real-time, global clearing and settlement for payment services and foreign exchange. "We are not targeting consumers, the retail business," Olson said. "And that's why this license, from Connecticut, was a perfect match for us." Their clients are payment service providers, non-bank financial insti- tutions, or medium-sized banks that need to make domestic or cross-border payments. Banking Circle US sees its role as smoothing the process of global trade and contributing to the modernization of payment infrastructure. "All of the banks in the U.S. right now are operating with largely outdated platforms," said Banking Circle's Chief Compliance Officer Megan Silvia. "Very few of them are cloud based, so it is another reason why we can operate so quickly — because it's new technology from the ground up." Being regulated as a bank in Connecticut should also allow the company to operate in other states without additional paperwork, some- thing Silvia says was a big draw. Currently, Banking Circle has 25 employees in Stamford, but its plans are much bigger. "If you look at our venture in Europe, we started with a handful of employees and now there's 600 in the bank alone and 1,200 in the group," Olson said. "And we have high expectations for our business model in the U.S. So, I would not be surprised that in a few years there will be several hundred employees." FINTECHS THAT APPLIED FOR CT'S UNINSURED BANK CHARTER • Banking Circle US • Numisma Bank (formerly Currency Reserve Bank) • TNB USA Inc. • Moneycorp Bank US Source: CT Dept. of Banking Megan Silvia Jorge Perez Continued on page 16

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