The Independent Community Bankers of America (ICBA) has voiced strong opposition to the Federal Deposit Insurance Corp.'s recent approval of Thrivent Bank, a new industrial loan company (ILC). ICBA President and CEO Rebeca Romero Rainey released a statement expressing concerns over the potential risks posed by ILCs.
"ICBA and the nation’s community banks strongly oppose the approval of deposit insurance applications from industrial loan companies, which present outsized risks to the Deposit Insurance Fund, financial stability, consumers, and taxpayers," Rainey stated. "The FDIC should deny ILC applications to prevent firms from skirting full regulatory oversight and violating U.S. policy separating banking and commerce through the ILC charter."
Rainey highlighted that ILC charters allow parent companies to own and operate FDIC-insured banks without adhering to the Bank Holding Company Act regulations applicable to traditional banks. This creates conflicts of interest and poses risks to consumer privacy and financial stability. Additionally, she pointed out that only a few states, including Utah, grant ILC charters, which could lead these states to influence national banking policy disproportionately.
"Notably, Congress is working to close the dangerous ILC loophole," Rainey added. She referenced the Close the Shadow Banking Loophole Act, introduced by Senate Banking Committee Chairman Sherrod Brown (D-Ohio) and Senator John Kennedy (R-La.), with co-sponsors Senators Mike Braun (R-Ind.), Bob Casey (D-Pa.), Chris Van Hollen (D-Md.), and Roger Wicker (R-Miss.). The proposed legislation aims to subject companies acquiring an ILC to consolidated supervision by the Federal Reserve akin to other bank holding companies.
"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," Rainey concluded. "The FDIC and Congress should stop allowing commercial firms to benefit from the federal safety net while avoiding regulatory oversight — the FDIC should reject pending ILC applications and Congress should pass the Close the Shadow Banking Loophole Act."
The ICBA continues its mission of fostering an environment where community banks can thrive through advocacy, education, and innovation. For more information about their initiatives, visit ICBA's website at icba.org.