ICBA - News - News Release - ICBA Urges FDIC to Extend ILC Moratorium To Allow for Congressional Action
ICBA News Release Header


ICBA Urges FDIC to Extend ILC Moratorium To Allow for Congressional Action

Asks FDIC to Hold Public Hearings

Washington, D.C. (Oct. 11, 2006)—The Independent Community Bankers of America (ICBA) called on the FDIC to extend the current six-month moratorium on industrial loan company (ILC) formations or acquisitions beyond January 31, 2007, to allow the new Congress an opportunity to act. ICBA also asked the FDIC to hold public hearings to fully examine the impact of commercial ownership of ILCs on the fundamental structure and safety and soundness of the nation's financial system, local communities, small businesses and consumers.

"It is increasingly clear that the narrowly intended ILC exception could eventually swallow the general rule, and a charter based in one state could irreversibly change our national financial landscape and our national financial policy without Congress having a say in the matter," said Camden R. Fine, ICBA president and CEO. "Final resolution of the issues that have been raised in the ILC debate will require Congressional action."

ICBA also asked the FDIC to support legislation that will prohibit commercial ownership of ILCs and provide for comprehensive, consolidated regulation of ILCs and their parent companies (H.R. 5746 and H.R. 3882).

"ICBA urges the FDIC to consider the original purpose of ILCs in the context of the banking and commerce debate that Congress has revisited from time to time-with Congress always determining that banking and commerce should remain separate," ICBA wrote in a letter to the FDIC. "An obscure exception or loophole in the law should not become a vehicle through which the financial and economic landscape of our nation is rearranged, or to create a parallel banking system with different rules and regulations than those that govern the regular banking system."

In addition, ICBA expressed skepticism that approval of an application with restrictions on growth, branching or changes in the ILC's business plan would adequately protect against the safety and soundness risks or the negative effects inherent in commercial ownership of ILCs. Even with conditional approval, there is nothing to prevent a future FDIC board from lifting or modifying the restrictions and allowing a commercially owned ILC to expand its business plan. ICBA said that additional public hearings on the overall issues surrounding ILCs are necessary in order to allow for more robust public input on the matter.

ICBA has been leading the effort to maintain our nation's long-standing policy against the mixing of banking and commerce. Allowing commercial firms to own banks concentrates economic power, jeopardizes the impartial allocation of credit, and poses serious competitive issues for local merchants and other businesses. In addition, because ILCs and their parent companies are exempt from consolidated regulation and supervision under the Bank Holding Company Act, they pose a risk to the safety and soundness of our financial system and the Deposit Insurance Fund. Read ICBA's comment letter at www.icba.org.