Defending the Bank Charter
Allowing large retail or technology conglomerates to own banks violates the U.S. policy of maintaining the separation of banking and commerce, jeopardizes the impartial allocation of credit, creates conflicts of interest, a dangerous concentration of commercial and economic power, and unwisely extends the federal safety net to commercial interests.
Take Action Today
Help advocate for community banking by writing a letter to congress.
Join the ICBA Community
Explore the ICBA Community to see discussions on this and other issues.
Position & Background
In order to protect stability and integrity of the financial system, the Federal Reserve must not expand eligibility for access to master accounts or the payment system.
ICBA opposes granting trust charters to nonbanks that are not subject to the same regulation and supervision as community banks. Special purpose bank charters or similar alternatives should not be granted to digital asset entities that do not fully meet the requirements of federally insured and supervised chartered banks. (See “Digital Assets” resolution.)
Corporate conglomerates or other companies engaged in commercial activities should not be allowed to own full-service or special purpose banks in violation of the longstanding U.S. policy of maintaining the separation of banking and commerce.
Congress should close the ILC loophole and prevent the creation of special purpose national bank charters because they not only threaten the financial system but create an uneven playing field for community banks.
The OCC should have explicit statutory authority from Congress before issuing any special purpose national bank charter for financial technology (fintech) companies. Any new federal charter should be subject to the same standards of safety, soundness, and fairness as other federally chartered institutions.
The Federal Reserve Banks should conduct rigorous due diligence of state chartered special purpose depository institutions (SPDIs) before granting them access to the payments system.
The long-standing policy prohibiting affiliations or combinations between banks and non-financial commercial firms (such as Wal-Mart, Amazon, and Google) has served our nation well and was reaffirmed by the Gramm-Leach-Bliley Act (GLBA). Allowing large retail or technology conglomerates to own banks violates the U.S. policy of maintaining the separation of banking and commerce, jeopardizes the impartial allocation of credit, creates conflicts of interest, a dangerous concentration of commercial and economic power, and unwisely extends the federal safety net to commercial interests.
In recent years, the FDIC approved a number of ILC charter applications. ICBA believes that all ILC applicants for deposit insurance should be subject to the restrictions and supervision that apply to any bank holding company of a community bank.
Furthermore, it would be a violation of Section 2 of the Federal Reserve Act for the OCC to approve a national bank charter to a non-depository institution. Section 2 is clear that every national bank must be a member of the Federal Reserve System and every member of the Federal Reserve System must be an insured bank.
The federal banking agencies have seen an influx of applications by nonbank entities, including digital assets firms, that are seeking the benefits of a bank charter without satisfying the full scope of U.S. banking regulations, threatening consumers and the financial system.
Letters & Testimonies
ICBA Expert Contacts
Jenna Burke
