FOR IMMEDIATE RELEASE
ICBA, Trade Groups Urge Senate to Close ILC Loophole
Washington, D.C. (July 19, 2007)—The Independent Community Bankers of America (ICBA), is calling on the U.S. Senate to quickly pass legislation to close the loophole in banking law that commercial enterprises are using to circumvent national policy and own FDIC-insured banks. In a joint letter with the American Bankers Association and America's Community Bankers, the three groups said this legislation is necessary to maintain the integrity and safety and soundness of the nation's financial system and prevent conflicts of interest that could skew credit decisions to benefit the commercial owner. The letter also called attention to the urgency of closing the loophole because a moratorium on industrial loan company (ILC) applications by commercial firms that the FDIC instituted to give Congress a chance to act expires on January 31, 2008.
"The separation of banking and commerce is good for our customers, our financial system and our economy," said Camden Fine, ICBA chairman and CEO. "Time is of the essence. Allowing commercial firms to continue to exploit this loophole circumvents good public policy."
In the letter to Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Ranking Member Richard Shelby (R-Ala.), the three banking trade associations said passage of the Industrial Bank Holding Company Act (S. 1356) is needed to maintain the integrity and safety and soundness of the nation's financial system, including deposit taking, lending, and payments processing, by prohibiting any additional commercial companies from acquiring ILC charters.
While federal law currently prohibits the mixing of banking and commerce, some commercial firms circumvent this long-held principle by using a provision of law permitting ILCs chartered in a handful of states to operate as FDIC-insured banks. Failure to close the loophole will allow additional commercial firms to charter and acquire ILCs and may allow them to direct credit to their commercial businesses and restrict credit to their competitors, the letter noted. Such allocations of credit would have a negative impact on consumers of credit, our financial system and the nation's economy.
Commercial firms have questioned the legal authority of the FDIC to impose a moratorium, and may seek to end the moratorium before it expires, adding to the urgency to pass the measure.
Senators Tim Johnson (D-S.D.), Sherrod Brown (D-Ohio), and Wayne Allard (R-Colo.) introduced S.1356 in May. The U.S. House of Representatives passed its version of the bill, the Industrial Bank Holding Company Act of 2007 (H.R. 698) by a wide margin of 371-16 in May.
Read the full letter at www.icba.org.