The Independent Community Bankers of America (ICBA) recently released a report detailing why policymakers should close a legal loophole associated with industrial loan operations.
“The industrial loan company loophole allows commercial interests to own full-service banks while avoiding key regulations and consolidated supervision by the Federal Reserve, threatening the financial system and creating an uneven regulatory playing field,” Rebeca Romero Rainey, 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.”
Romero Rainey said in order to support a safe and sound financial system and maintain the separation of banking and commerce, the FDIC should reinstate the moratorium on ILC applications and Congress should close this loophole for good.
An ICBA white paper maintains a loophole in the Bank Holding Company Act allows commercial and fintech companies to own or acquire ILCs chartered in a handful of states without being subject to federal consolidated supervision, leaving a dangerous gap in safety and soundness oversight.
“In the new era of big data, tech conglomerates and artificial intelligence, we should stop and think before giving these companies further reach into the economic lives of Americans,” Romero Rainey said. “FDIC approval of new ILC deposit insurance applications would put the federal safety net, and ultimately the American taxpayer, at risk.”