Community Bankers Association of Illinois

FDIC APPROVES COMMERCIAL ILC APPLICATION

NOTE: The FDIC Moratorium on approving ILC applications for firms that engage in commercial activities will end on January 31, 2008! Senator Durbin and Obama are both co-sponsors of the ICBA/CBAI initiated legislation (S. 1356) that seeks to address the separation of banking and commerce issues that arise by allowing commercial firms to receive an ILC charter.

In case you may have missed it, the FDIC recently approved an application by WellPoint, Inc. to open an industrial loan company while continuing to engage in commercial activities. If that doesn’t open your eyes how about the fact that the FDIC asked the Federal Reserve Board their opinion first!

A recent American Banker article entitled “ILC Gets OK After Unusual Consultation” indicated that although “…the FDIC is the sole federal regulator for industrial banks… the FDIC sought comment from the Fed to determine whether those [commercial] activities were financial in nature. The Utah Department of Financial Institutions was still reviewing the application at the time of the article. Click here for the full American Banker article.

This decision seems to indicate that common ground has been found between the two regulators. The Fed has indicated support for legislation that “would give the FDIC consolidated holding company authority over ILC parents.”

Observers are wondering what impact this decision may have on the ILC debate as it moves forward. Some believe that this decision may lead to both agencies using a standard that if it is OK for a financial holding company then it will be OK for an ILC. Others believe this will require more specificity than that simple test. This is not the first exception to the moratorium and it may not be the last. Please stay tuned to CBAI’s ILC-Watch for further updates and information!

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