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ICBA Says Wal-Mart’s Bank Insurance Application Must Be Denied

Fails to Meet Four of Seven Statutory Requirements

Washington, D.C. (May 8, 2006)—The Independent Community Bankers of America (ICBA) told the FDIC that it should deny Wal-Mart's application for federal deposit insurance for an industrial loan corporation (ILC) because it fails to meet four of the seven required criteria. Under the Federal Deposit Insurance Act, applicants for deposit insurance must meet each of the statutory criteria before receiving deposit insurance. ICBA's comments came as the FDIC closed the hearing record on the application on May 5 after three days of public hearings in April.

"Failure to meet even one of the criteria is enough to deny deposit insurance," said Terry J. Jorde, ICBA chairman and president and CEO of CountryBank USA, Cando, N.D. "Testimony and evidence presented at the public hearings created an extensive and compelling record that Wal-Mart's insurance application fails to meet the statutory criteria."

In its letter to FDIC Acting Chairman Martin Gruenberg, ICBA lists the criteria the Wal-Mart application fails to meet:

  • Adequacy of capital and risk to the Deposit Insurance Fund: A Wal-Mart Bank would threaten the stability of the payments system by processing more than $170 billion a year in electronic transactions from Wal-Mart stores, which represents 1400 times the bank's capital.

  • Risk to the Deposit Insurance Fund: A Wal-Mart Bank would pose severe risks to the Deposit Insurance Fund, and to the economy as a whole, that could produce staggering losses in case of a failure because of Wal-Mart's size, global reach, and extraordinary risks.

  • General character and fitness of management: Wal-Mart has a history of statutory and regulatory violations and is one of the most often sued companies in history.

  • Convenience and needs of the community: A Wal-Mart Bank would destabilize communities by diverting capital out of the community, creating a capital vacuum and depriving affected communities of strong stakeholder resources, and skew loan decisions by steering capital away from competing businesses.

In addition, ICBA pointed out that granting a bank charter to Wal-Mart violates the long-standing public policy separating banking and commerce. ICBA's efforts in leading the fight to maintain this policy and to keep Wal-Mart out of banking led the FDIC to hold public hearings for the first time on a bank application. ICBA and more than 60 other groups testified in opposition to the application. In addition, the FDIC received over 4,000 letters (a record number), most opposing the application. Nearly 100 members of Congress have also expressed concern about a Wal-Mart bank. For more information and ICBA's letter, visit www.icba.org.