ICBA and affiliated state community banking associations expressed strong support for Senate legislation to permanently close the industrial loan company loophole.

Bill Details: The Close the Shadow Banking Loophole Act (S. 3538) — introduced by Senate Banking Committee Chairman Sherrod Brown (D-Ohio) and Sen. John Kennedy (R-La.) — would require companies that acquire an ILC to be subject to the same consolidated supervision by the Federal Reserve as any other bank holding company.

Joint Letter: In a letter to Brown, Kennedy, and the bill’s co-sponsors — Sens. Mike Braun (R-Ind.), Bob Casey (D-Pa.), Chris Van Hollen (D-Md.), and Roger Wicker (R-Miss.) — the groups said the legislation would prevent large commercial firms from exploiting this loophole to gain access to the federal deposit insurance safety net without equivalent oversight and supervision.

ICBA Advocacy: ICBA last month expressed strong support for the Senate bill in a national news release and a joint letter to the co-sponsors. An ICBA white paper 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.

Legislative Outlook: Brown cited the bill as priority legislation in a memo last month on this year’s legislative agenda. In their joint letter, ICBA and the state banking groups pledged to work with the Senate offices to advance the measure.