ICBA Opposes Rakuten's Resubmitted ILC Application

ICBA Press Release Banner 2020

Washington, D.C. (June 30, 2020) — The Independent Community Bankers of America® (ICBA) called on the Federal Deposit Insurance Corp. to deny Rakuten Bank America’s resubmitted federal deposit insurance application and urged Congress to permanently close the industrial loan company loophole.

In a comment letter, ICBA said the application would allow the "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 continue to oppose Rakuten's application because the industrial loan company loophole allows these financial firms and their parent companies to avoid key 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."

Like other ILC applications, Rakuten Bank America is applying as an ILC rather than a commercial bank so its parent companies may avoid the legal restrictions of the Bank Holding Company Act, ICBA wrote. ICBA also said the global reach of Rakuten's commercial activities—which include an online marketing business and even its own professional baseball team—pose risks to the FDIC's Deposit Insurance Fund and the financial system more broadly.

In a comprehensive white paper released last 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 oversight. With technology companies such as Square, SoFi, and Nelnet—and possibly giants like Google, Amazon, and Facebook—joining Rakuten in seeking ILC charters and deposit insurance, the result would be anticompetitive effects including enormous concentration of financial and technological assets,  significant customer privacy concerns, and conflicts of interest.

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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