Washington, D.C. (Dec. 17, 2020) — Today, the Bank Policy Institute, Center for Responsible Lending and the Independent Community Bankers of America issued the following joint statement in response to a vote by the FDIC to approve a final rule on Industrial Loan Companies (ILCs):

On Tuesday, the Federal Deposit Insurance Corporation finalized its rule governing supervision of parent companies of industrial loan companies. The FDIC has stated that this rule will formalize and strengthen the existing supervisory processes and policies that apply to parent companies of ILCs that are not subject to Federal consolidated supervision.

However, the true effect of this rule will be to signal that this charter is a viable back-door option for entering the business of banking without the obligations of consolidated supervision by the Federal Reserve. This rule also cuts against the grain of the long-established separation of banking and commerce, embodied in the Bank Holding Company Act, which prohibits the ownership or control of banks by commercial firms in order to preserve fair and competitive access to credit.

It will encourage companies, including Big Tech firms, to acquire ILC charters that will receive the benefits of a bank license, without the federal oversight of the parent company required for traditional banks — posing both consumer protection and systemic risks. In addition, given the effective date of the FDIC’s rule is not until April 2021, firms may attempt to secure their charter in the next few months in order to avoid being subject to this rule.

Ultimately, congressional action is urgently needed to close the statutory loophole that permits commercial firms to own ILCs without being subject to Federal Reserve supervision. We will work with the next Congress to ensure passage of legislation that prohibits the FDIC from approving licensing applications for ILCs and permanently closes the loophole.

About Bank Policy Institute.
The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

About The Center for Responsible Lending.
The Center for Responsible Lending (CRL) is a nonprofit, non-partisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices.
About ICBA.
The Independent Community Bankers of America creates and promotes an environment where community banks flourish. ICBA is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education, and high-quality products and services.

With nearly 50,000 locations nationwide, community banks constitute 99 percent of all banks, employ more than 700,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding more than $5 trillion in assets, over $4.4 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.