An interview with Amy Friend, former Senior Deputy Comptroller and Chief Counsel of the OCC
Amy Friend has spent decades working as a regulator, congressional staffer, and advisor on issues related to financial regulation. She was previously the Senior Deputy Comptroller and Chief Counsel of the OCC where she oversaw the establishment of the agency’s Office of Innovation. She was previously a Managing Director at Promontory and also served as Chief Counsel to the Senate Committee on Banking Housing, and Urban Affairs and Minority General Counsel to the House Committee on Banking, Finance and Urban Affairs.
Today she serves on the boards of FinRegLab and Varo Bank NA. She is also the co-founder of ALLRISE DC and a Senior Advisor to the Alliance for Innovative Regulation and FS Vector.
You can find Amy here.
The Interview
The Axial Studio
Tell us your story and how you became a regulator?
Amy Friend
I did not have a linear path to becoming a regulator. In my high school yearbook, people said, “you'll be a great lawyer.” I have no recollection of wanting to be a lawyer, but that is what I became. I was a psychology major in college, so I thought I might become a clinical psychologist but in college I got very interested in politics. I thought that might be my path to change the world. So I decided to move to Washington. I had a bug to do something in the politics / policy space. After practicing law for a bit, I went to Capitol Hill and got my first job with a then young Congressman Schumer. I went to a couple of different offices and ended up at the House Banking Committee, which is now the House Financial Services Committee as Counsel and as the Minority General counsel for the Democrats. Then, the Comptroller of the Currency, Gene Ludwig, asked me to join the law department of the OCC.
The Axial Studio
What is your regulatory philosophy, particularly when it comes to innovative technologies colliding with existing systems?
Amy Friend
There were a couple of things I did as a regulator that I thought were pretty cutting-edge and that I'm proud of. First was in the privacy area, which was part of the Gramm-Leach-Bliley Act. It was new and novel. We put together regulation amongst 7 different agencies in a very short period of time. But the thing we did that I was very proud of is that we used consumer testing to develop a privacy notice. Consumers at the time were not paying attention to their annual privacy notices. But the form that we developed is now used regularly and in many different contexts. What I loved about that was to see how that testing worked and that regulators were willing to take that approach to get to consumers in a way we hadn’t previously.
Another was leading the innovation effort at the OCC. At the time I was the Chief Counsel and on the Executive Committee. We had a strategic planning session that came up with 5 strategic priorities. One of them was something like ‘enhance the value of the agency to the American people and the federal banking system.’ From that came this innovation initiative where I put together a group of cross-functional people across the agency. We saw that there was a lot of financial innovation happening outside of the regulated space and we thought we should understand what this innovation is for a number of reasons. First, so that the agency could articulate its own risk appetite in this area and so the banks could know what they could do. And second, to demystify what our regulation and supervision was for fintech companies. So my philosophy was that we have to allow for growth and change.
The Axial Studio
As new fintech innovations such as crypto – or maybe in the future AI – come up, what is the internal conversation like at a regulatory agency around new developments like this?
Amy Friend
First, they try to figure out if this is an issue they have to pay attention to. I remember when I was at the OCC, earlier in my tenure, when we first talked about crypto, we thought “it’s not in the banking system so we don’t want to take responsibility for it.” That is where the banking agencies were at the time. So it didn’t make sense to reach out and spend more time understanding it or doing anything about it. If it is something that the agency sees as coming into their space, they want to figure out how to understand it.
I remember when we first started working on this innovation initiative, there were some examiners that saw activities in a bank that they didn’t understand and there was nobody that could help them figure it out. So we saw the office of innovation as a central point of contact for the fintechs and banks to come and talk about these new innovations. We could provide resources that make sure people across the agency understand these things.
Now all of these banking agencies have offices of innovation, they may operate slightly differently, but there is an acknowledgement that things are changing and that the agencies need to understand the innovation coming to their space. Also that something that might not be relevant today, might turn out to be relevant in a year or two.
The next question is, how do you permeate a culture within the agency, that is risk-averse by nature, to be open to understanding that opportunities come with innovation and not just risk.
The Axial Studio
How do you do that within a regulatory agency?
Amy Friend
Having conversations and familiarizing staff with the concept is a good start. But the agency has to show some willingness and openness to empower the staff and set the tone. But also, to make a change in a culture, you have to understand it. You have to figure out how to speak the language of the staff who have done things a certain way for a long time. Agencies have shown a willingness to talk to fintechs and innovators, as they’ve set up office hours and other forums. But the companies engaging regulators have to show they understand what the regulators are doing and what their responsibilities are.
The Axial Studio
Switching gears a bit. You’re now on the boards of companies and advising others. What advice do you have for founders that are getting started, particularly those who don’t come from a regulated background?
Amy Friend
There has traditionally been a philosophy of invent, see what sticks and move forward, where you only care about the innovation and finding something that works and then worrying about compliance later. It’s more painful and expensive to build in a risk framework and compliance from the beginning. But in the end, it probably saves a lot of heartache. If you just have people working on problem solving, but don't have the mindset of what it means to operate in a regulated space, it will eventually become a clash of cultures.
The Axial Studio
What is the most common misconception founders have about regulators?
Amy Friend
One is the idea that “we know our business and the regulators just don't understand.” Yes, founders do know their business, but regulators know their business too. And if you touch a regulated space, you have to respect the knowledge on both sides. Often innovators come to DC to meet with legislators and regulators and think that they are just so much smarter than them. But they aren’t smarter if they underestimate what the regulatory or legislative authorities can do and the power they have to make their lives into something that they did not anticipate.
The Axial Studio
How can people get smart on regulation?
Amy Friend
I would say read the annual or semi annual reports that regulators put out. Figure out what they are looking at and what are the risks they are identifying. The OCC puts out a semi-annual risk perspective and the Federal Reserve puts out something as well. Those are a good place to start. It’s a good window of what they’re looking at. You can also look at speeches and testimony.
The Axial Studio
What are you excited about right now?
Amy Friend
The thing that's exciting in general, is that technology can break down some barriers that I think have been erected for a number of reasons by the traditional financial system. I think we’re at a time where there’s a lot of skepticism about what technology is doing and how it can be used. I’m optimistic that people are paying attention to policymakers and starting to really figure out what these guardrails should be. I think the agencies will be coming out with more pronouncements that allow technology to move forward in a responsible way where people are not guessing because they have more of a roadmap.