Senators call for moratorium on ILC approvals

Two Democratic senators called on the FDIC to halt industrial loan company charter approvals until Congress passes a law defining ILCs as banks.

Details: In a letter to FDIC Acting Chairman Travis Hill, Senate Banking Committee ranking member Elizabeth Warren (D-Mass.) and committee member Andy Kim (D-N.J.) said:

• In the early 2000s, the FDIC imposed a moratorium after Walmart’s proposed industrial bank raised broad public concerns, and a similar pause is needed now.

• A moratorium would provide Congress with an opportunity to address a longstanding crack in the wall separating banking and commerce before it becomes a chasm.

• The separation of banking and commerce promotes competition across the economy, enhances financial stability, protects economic and political systems from concentrating too much power in the hands of corporate giants, and must be preserved.

Recent ICBA Advocacy: ICBA last month 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.

ICBA Statement: In a national news release on its FDIC letter, 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: ICBA polling of U.S. adults conducted by Morning Consult in June found 61% agree that allowing commercial companies to own banks without being subject to all banking regulations could make the financial system riskier.

More 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.