The FDIC board of directors approved the deposit insurance application submitted by the Jones Financial Companies to establish an industrial loan company called Edward Jones Bank to be based in Utah.
Details: Edward Jones Bank’s proposed business model will focus on providing securities-based loans nationwide funded by sweep deposits from existing clients of Edward D. Jones & Co., L.P. The announcement follows last month’s FDIC approval of ICBA-opposed applications from Ford and General Motors to establish ILCs.
Background: A loophole in the Bank Holding Company Act allows commercial and fintech companies to own or acquire ILCs chartered in a handful of states without being subject to federal consolidated supervision, leaving a dangerous gap in safety and soundness oversight and introducing unnecessary systemic risk into the banking system.
ICBA Opposition: In recent letters to the FDIC on ILC applications, ICBA has called on the agency to pause consideration of pending applications until it has issued rules or otherwise provided greater transparency on ILC filings. ICBA also has called on the agency to reject applications of ILCs that pose undue risks to the Deposit Insurance Fund and that fail to serve the convenience and needs of their communities.
ICBA White Paper: In a recent white paper, ICBA details why Congress should close the ILC loophole and the FDIC should delay final decisions on pending ILC deposit insurance applications until all stakeholder feedback is fully incorporated.
New Legislation: ICBA in January expressed strong support for the Close the Shadow Banking Loophole Act introduced by Senate Banking Committee members John Kennedy (R-La.) and Andy Kim (D-N.J.) to close the ILC loophole.