Washington, D.C. (Dec. 15, 2023) — The Independent Community Bankers of America (ICBA) today expressed its strong support for bipartisan legislation to close the industrial loan company (ILC) loophole, which allows commercial companies to own full-service banks without the same regulatory oversight and violates U.S. policy separating banking and commerce.

Introduced by Senate Banking Committee Chairman Sherrod Brown (D-Ohio) and Sen. John Kennedy (R-La.)—and co-sponsored by Sens. Mike Braun (R-Ind.), Bob Casey (D-Pa.), Chris Van Hollen (D-Md.), and Roger Wicker (R-Miss.)—the Close the Shadow Banking Loophole Act would close the ILC loophole to mitigate risks to the Deposit Insurance Fund, consumers, and the economy.

“ICBA and the nation’s community banks thank Chairman Brown and Sen. Kennedy for introducing legislation to permanently close the industrial loan company loophole,” ICBA President and CEO Rebeca Romero Rainey said. “The ILC loophole allows large commercial and technology firms to own full-service banks while skirting regulatory oversight—threatening the financial system, endangering consumers, and creating an uneven regulatory landscape. The Close the Shadow Banking Loophole Act will ensure any company that wishes to own a full-service bank is subject to the same restrictions and supervision that apply to any other bank holding company.”

The ILC loophole allows large technology companies like Japanese e-commerce firm Rakuten and other commercial firms to own and operate FDIC-insured banks while skirting federal regulations that apply to other banks — creating conflicts of interest and posing risks to the financial system and consumer privacy. With the ILC charter evolving over time into the fashionable charter of choice for technology and commercial firms seeking to operate banks, the Close the Shadow Banking Loophole Act requires companies that acquire an ILC to be subject to the same consolidated supervision by the Federal Reserve as any other bank holding company.

ICBA and community bankers will continue working with policymakers to advance this much-needed legislation to preserve the separation of banking and commerce and ensure any company that wishes to own a full-service bank is subject to the same rules.

About ICBA

The Independent Community Bankers of America® has one mission: to create and promote an environment where community banks flourish. We power the potential of the nation’s community banks through effective advocacy, education, and innovation.

As local and trusted sources of credit, America’s community banks leverage their relationship-based business model and innovative offerings to channel deposits into the neighborhoods they serve, creating jobs, fostering economic prosperity, and fueling their customers’ financial goals and dreams. For more information, visit ICBA’s website at icba.org.