ICBA expressed strong support for the introduction of Senate legislation to close the industrial loan company loophole.
Background: The ILC loophole allows large tech companies and other commercial firms to own and operate FDIC-insured banks while skirting federal regulations that apply to other banks. This leaves a gap in safety and soundness oversight, creates an unlevel regulatory playing field, and violates the separation of banking and commerce.
New Legislation: The Close the Shadow Banking Loophole Act—introduced by Senate Banking Committee Chairman Sherrod Brown (D-Ohio) and Sens. Bob Casey (D-Pa.) and Chris Van Hollen (D-Md.)—would subject ILC holding companies to the Bank Holding Company Act and the consolidated supervision of the Federal Reserve, closing the loophole.
Outlook: Following the House Financial Services Committee's passage of the bipartisan Close the ILC Loophole Act (H.R. 5912) earlier this year, the Senate introduction of a substantially similar bill offers Congress an opportunity to pass this bipartisan legislation during the current session.
ICBA Response: In a national news release, ICBA President and CEO Rebeca Romero Rainey called on lawmakers to advance the legislation. ICBA also advocated passage in a joint letter with state community banking associations as well as a joint letter and news release with other financial services and consumer groups.
More: In a comprehensive white paper, ICBA details the transformation of the ILC charter into the fashionable charter of choice for firms seeking to benefit from the federal safety net while avoiding oversight.