Washington, D.C. (Dec. 6, 2022) — The Independent Community Bankers of America (ICBA) today expressed its strong support for Senate Banking Committee Chairman Sherrod Brown's (D-Ohio) introduction of the Close the Shadow Banking Loophole Act to close the industrial loan company loophole, which allows companies to skirt regulatory oversight and violates U.S. policy separating banking and commerce.
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 substantially similar legislation offers Congress an opportunity to pass this bipartisan legislation during the current session. Legislation to close the ILC loophole enjoys strong support from numerous financial services and consumer organizations. Given the current meltdown in the crypto sector and other nonbank financial areas, closing known regulatory loopholes to prevent contagion extending to the traditional banking system is more important than ever.
"ICBA and the nation's community banks thank Chairman Brown 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 the economy, and creating an uneven regulatory landscape. The Close the Shadow Banking Loophole Act will ensure a safe and sound financial system and protect the longstanding U.S. policy separating banking and commerce."
The Close the Shadow Banking Loophole Act would close the ILC loophole, which 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 applied to other banks — posing risks to the financial system. With the ILC charter evolving over time into the fashionable charter of choice for firms seeking to benefit from the federal safety net while avoiding oversight, the Close the Shadow Banking Loophole Act would subject ILC holding companies to the Bank Holding Company Act and the consolidated supervision of the Federal Reserve — closing this dangerous loophole.
ICBA and community bankers will continue working with policymakers to advance this much-needed legislation to help 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 Independent Community Bankers of America® creates and promotes an environment where community banks flourish. ICBA is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education, and high-quality products and services.
With nearly 50,000 locations nationwide, community banks constitute roughly 99 percent of all banks, employ nearly 700,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding more than $5.8 trillion in assets, over $4.8 trillion in deposits, and more than $3.5 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.