ICBA urged the FDIC to reject Nissan’s deposit insurance application for its proposed industrial loan company, Nissan Bank.
About Nissan’s Application: Nissan Motor Acceptance Company—the financial services arm of Nissan North America—last month submitted an application to the FDIC and the Utah Department of Financial Institutions to form an ILC based in Salt Lake City. Nissan said the proposed ILC would focus on commercial financing for dealerships.
ICBA Opposition: In a letter to the FDIC, ICBA said the risks associated with ownership of an industrial loan company by a commercial parent company include:
Inherent conflict of interest and risk to the Deposit Insurance Fund.
Undiversified business model that amplifies systemic risk.
Inadequate supervision due to ILC loophole.
Failure to serve community needs.
Consumer Opposition: In a national news release on the letter, ICBA shared polling showing consumer concerns with the ILC loophole. According to the polling of U.S. adults conducted by Morning Consult in June:
61%—including 64% of Democrats and 64% of Republicans—agree that allowing commercial companies to own banks without being subject to all banking regulations could make the financial system riskier.
59%—including 61% of Democrats and 61% of Republicans—agree that the ILC charter creates a loophole for companies to avoid regulations that traditional banks must follow.
What It Means for Community Banks: The ILC loophole allows commercial companies to own and operate FDIC-insured banks while skirting federal regulations that apply to other banks. ICBA has consistently opposed attempts by commercial companies to obtain ILC charters, noting they would violate the separation of banking and commerce and threaten the DIF.
ICBA Opposition to ILCs:
ICBA recently expressed opposition to ILC applications by Stellantis and General Motors, saying they pose risks to the DIF and don’t serve the convenience and needs of the community.
In a recent American Banker op-ed (subscription required), ICBA said maintaining the separation between banking and commerce is a crucial safeguard that policymakers should strengthen by repealing the ILC loophole.
Closing the Loophole: 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. ICBA will continue to advocate for legislation that subjects companies that acquire an ILC to the same consolidated supervision by the Fed as any other bank holding company.