ICBA published a new white paper detailing why policymakers should close the industrial loan company loophole, which allows ILCs and their parent companies to skirt regulatory oversight, endangering consumers and the economy.
Details: In “Closing the Industrial Loan Company Loophole: An Urgent Priority to Prevent Systemic Risk and Consumer Harm,” ICBA:
Said the ILC loophole allows commercial interests to own full-service banks while avoiding key regulations and consolidated supervision by the Federal Reserve, which threatens the financial system and creates an uneven regulatory playing field.
Called on Congress to close the loophole and on the FDIC to delay final decisions on pending ILC deposit insurance applications until all stakeholder feedback is fully considered.
Statement: In a national news release after ICBA delivered the white paper to the FDIC and congressional offices, ICBA President and CEO Rebeca Romero Rainey said any company that wishes to own a full-service bank should be subject to the same restrictions and supervision that apply to any other bank holding company.
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.
Recent ICBA Advocacy: ICBA in September told the FDIC that it has a statutory duty to reject ILC applications that pose undue risks to the Deposit Insurance Fund and fail to serve the convenience and needs of their community. Earlier this year, ICBA expressed opposition to ILC applications from Nissan, Stellantis, and General Motors and detailed the issue in an American Banker op-ed (subscription required).
Key Position: Supporting a level regulatory playing field to ensure financial policies do not erode the competitive landscape is a key priority of ICBA’s “Repair, Reform, and Thrive” plan and open letter to the 119th Congress.