ICBA told the FDIC that it has a statutory duty to reject the applications of industrial loan companies that pose undue risks to the Deposit Insurance Fund and fail to serve the convenience and needs of their community.
ICBA Comments: In a comment letter responding to the FDIC’s request for information on how the agency reviews filings submitted by ILCs, ICBA noted:
ILCs present outsized risks to the DIF and consumers due to their exemption from consolidated supervision by the Federal Reserve Board under the Bank Holding Company Act and ownership by non-financial parent companies.
The ILC loophole allows large commercial-financial conglomerates to introduce unnecessary systemic risk into the banking system, as illustrated by the 2008 failure of the General Motors Acceptance Corporation and its $17.2 billion taxpayer-funded bailout.
What It Means for Community Banks: In a national news release, 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.”
Public Support: According to ICBA polling of U.S. adults conducted by Morning Consult in June, 61% agree that allowing commercial companies to own banks without being subject to all banking regulations could make the financial system riskier.
ICBA Advocacy:
ICBA in July urged the FDIC to reject Nissan’s deposit insurance application for its proposed ILC, Nissan Bank, noting the inherent conflict of interest and risk to the DIF.
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.
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.