ICBA Opposes Rakuten ILC Application

Aug 21, 2019

Industrial loan company charter endangers consumers

Washington, D.C. (Aug. 21, 2019)—The Independent Community Bankers of America® (ICBA) today called on the Federal Deposit Insurance Corp. to deny Rakuten Bank America’s federal deposit insurance application and impose an immediate moratorium on industrial loan company applications. In a comment letter to the agency, ICBA said the application would allow the "Amazon of Japan's" subsidiary to skirt regulatory oversight and violate U.S. policy separating banking and commerce. 

"ICBA and the nation's community banks oppose Rakuten's application because the industrial loan company loophole allows these financial institutions and their parent companies to avoid key regulations and oversight, threatening the financial system and creating an uneven regulatory playing field," ICBA President and CEO Rebeca Romero Rainey said. "Any company that wishes to own a full-service bank should be subject to the same restrictions and supervision that apply to any other bank holding company. The FDIC should impose a moratorium on ILC applications, and Congress should close this loophole for good."

Like other ILC applications, Rakuten Bank America is applying as an ILC rather than a commercial bank because its parent companies do not want to be subject to the legal restrictions of the Bank Holding Company Act, ICBA wrote. ICBA also noted in its comment letter that this application presents the mixing of commerce and banking at a new and unprecedented level because Rakuten Inc.'s e-commerce and other commercial activities are so diverse and operate on a global stage. The conglomerate owns an online marketing business, has significant investments in a range of companies worldwide, and even formed its own professional baseball team.

In a comprehensive white paper released earlier this year, ICBA detailed the transformation of the ILC charter into the fashionable charter of choice for financial firms seeking to benefit from the federal safety net while avoiding legal restrictions and company oversight under the Bank Holding Company Act. ICBA issued “Industrial Loan Companies: Closing the Loophole to Avert Consumer and Systemic Harm” as technology companies such as Square, SoFi, and Nelnet have sought ILC charters under Utah law and filed deposit insurance applications following ICBA’s successful campaign against Walmart’s bid for an ILC charter in 2006.

ICBA looks forward to continuing to work with the FDIC and Congress to address the ILC loophole and maintain the separation of banking and commerce.

 About ICBA

The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. With more than 50,000 locations nationwide, community banks constitute 99 percent of all banks, employ nearly 750,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding more than $5 trillion in assets, nearly $4 trillion in deposits, and more than $3.4 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at www.icba.org.


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