The decision was outlined in the bank's 2023 annual report filed on 28 February. The bank stated its intention to terminate all banking-as-a-service relationships by early 2024, citing a desire to reduce exposure to evolving regulatory standards in the financial services industry. This move comes after an earlier decision in 2024 to exit consumer-facing banking-as-a-service partnerships.
According to americanbanker.com, this decision reflects a broader trend among financial institutions grappling with regulatory scrutiny and challenges in navigating unclear guidelines. Blue Ridge Bank, for instance, initiated the offboarding of several fintech partners in November 2023 after facing regulatory actions.
Metropolitan Commercial Bank's retreat from risky ventures is not unprecedented, as it completed its withdrawal from the digital currency business in 2023. As for the BaaS exit, analysts cited by the same source noted the bank's anticipated loss of USD 781 million in deposits, representing 13.6% of total deposits.
However, despite potential funding challenges, the bank expects minimal financial impact from discontinuing the BaaS line of business. Officials from Piper Sandler acknowledged both the regulatory benefits and the loss of a distinguishing factor in Metropolitan Commercial Bank's growth strategy.
In October 2023, the bank agreed to a USD 30 million settlement with regulatory authorities over deficiencies in its anti-money laundering programme and unsafe banking practices related to a prepaid card programme during the pandemic. This incident underscores the challenges faced by financial institutions in balancing innovation with regulatory compliance.
As previously mentioned, the Metropolitan Bank Holding Corp, the holding company for Metropolitan Commercial Bank, announced the shutting down of its crypto-asset-related vertical in January 2023.
According to Metro Central Bank’s statement, the company based its decision on various developments in the crypto asset industry, alongside changes in the regulatory landscape regarding banks’ involvement in crypto asset-related businesses. According to MCB, the process has been ongoing since 2017, and it expected little financial impact. At the time, the institution had four active institutional crypto asset-related clients, which account for around 1.5% of total revenues and 6% of total deposits.
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