ICBA Urges FDIC to Exercise Statutory Duty to Deny Pending ILC Applications

Washington, D.C. (Feb. 10, 2023) - The Independent Community Bankers of America (ICBA) today called on the Federal Deposit Insurance Corp. to deny pending deposit insurance applications from industrial loan companies, or ILCs, which present outsized risks to the Deposit Insurance Fund, financial stability, consumers, and taxpayers. In a letter to the FDIC board of directors, ICBA said the agency should deny applications from GM Financial Bank, Ford Credit Bank, and Rakuten Bank America under the authority expressly delegated to the agency by Congress.

"The FDIC has the statutory duty to deny deposit insurance applications from entities that fail to meet the standards of the Federal Deposit Insurance Act, which is the case for pending applications from GM Financial Bank, Ford Credit Bank, and Rakuten Bank America," ICBA President and CEO Rebeca Romero Rainey said today. "Ultimately, Congress should close the industrial loan company loophole to mitigate risks to the Deposit Insurance Fund and consumers and to preserve the long-standing U.S. policy separating banking and commerce. 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."

Following a September 2022 letter to the FDIC board from nine U.S. senators expressing support for the ILC charter, ICBA reminded the agency it has the statutory authority to reject deposit insurance applications when there is substantial evidence that a prospective depository institution fails to satisfy one or more of the factors specified in the Federal Deposit Insurance Act. There is substantial evidence that the pending ILCs fail to satisfy at least two of the factors outlined in the FDI Act because they create an undue risk to the DIF and are unlikely to satisfactorily serve the convenience and needs of the community, ICBA said.

The ILC loophole allows commercial and tech companies to own or acquire ILCs chartered in a handful of states without being subject to federal consolidated supervision. In a comprehensive white paper, ICBA details the transformation of the ILC charter into the fashionable charter of choice for firms seeking to benefit from the federal safety net while avoiding oversight. ICBA will continue working with the FDIC and Congress to address the ILC loophole and to maintain the separation of banking and commerce.

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 roughly 99 percent of all banks, employ nearly 700,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding more than $5.8 trillion in assets, over $4.8 trillion in deposits, and more than $3.5 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.

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