ICBA to FDIC: Commercial Firms Shouldn't Own Banks

Washington, D.C. (July 10, 2020) — The Independent Community Bankers of America® (ICBA) told the Federal Deposit Insurance Corp. that commercial firms should not own full-service banks or industrial loan companies, even if they are subject to enhanced supervision and regulation. In a comment letter on an FDIC proposal to strengthen its supervisory processes for ILC parent companies, ICBA commended the agency for issuing the proposal. However, ICBA said the agency plan falls short of ensuring the safety and soundness of these companies.

"Because of the unique risks that they would pose to our financial system, commercial firms should never be allowed to own an industrial loan company even if they are subject to enhanced regulation," ICBA President and CEO Rebeca Romero Rainey said. "The statutory loophole that allows commercial companies to own ILCs presents an outsized risk to the financial system and the economy, introducing conflicts of interest, and dangerous regulatory blind spots. Congress should close the ILC loophole permanently."

In its comment letter, ICBA said ILC holding companies should be subject to the Bank Holding Company Act and the consolidated supervision of the Federal Reserve rather than the supervision of the FDIC. ICBA also noted deficiencies with the FDIC’s proposal, including that it stops short of establishing capital requirements that would ensure ILC parents are a source of strength for their subsidiaries.

The letter follows a separate ICBA comment letter urging the FDIC to deny Rakuten Bank America’s resubmitted deposit insurance application and urging Congress to permanently close the ILC loophole. In that message, ICBA said the application would allow the "the Amazon of Japan" to skirt regulatory oversight and violate U.S. policy separating banking and commerce.

As detailed in its comprehensive white paper released last year, ICBA will continue working with the FDIC and Congress to address the ILC loophole and maintain the separation of banking and commerce.

About ICBA
The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. With more than 50,000 locations nationwide, community banks constitute 99 percent of all banks, employ nearly 750,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding more than $5 trillion in assets, nearly $4 trillion in deposits, and more than $3.4 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.

# # #