Community Bankers Association of Illinois

FDIC PUTS ILCS ON HOLD
09/29/06

Community banks scored a victory Friday as the FDIC announced that it would delay by at least six months any decision on approving applications by companies, including Wal-Mart and Home Depot, to own industrial loan companies. The Independent Community Bankers Association of America (ICBA) has led all banking trade groups in opposition to the applications. As a result of their campaign, coordinated with CBAI and other state community bank trade groups, over 100 members of Congress have called for the moratorium.

The board also placed the moratorium on notices of change in bank control for existing ILCs. Further, the FDIC will not make any final decisions on the 14 pending ILC applications-including the Wal-Mart and Home Depot applications-or accept any future applications for deposit insurance or notices of change in control for ILCs during this period.

The FDIC said the moratorium is needed so it can consider developments in the ILC industry, determine if any emerging safety and soundness or policy issues exist involving ILCs, and evaluate whether statutory, regulatory or policy changes are needed to protect the deposit insurance fund. The board also raised questions concerning the quality of supervision of ILCs, which are overseen by the FDIC and state regulators. It noted that the parent companies of ILSs, unlike other types of banks, are not subject to a federal, consolidated supervisor such as the Federal Reserve Board.

Representative Paul Gillmore, R-Ohio, and Barney Frank, D-Mass. Have authored a bill, HR 5746, which would close the industrial company loophole by prohibiting commercial firms from chartering or acquiring industrial banks after June 1, 2006. Representative Gillmore has already stated his desire for the FDIC to extend the moratorium beyond 6 months in order to give Congress sufficient time to act.

Meanwhile, CBAI continues to urge you to contact your congressman and urge him or her to co-sponsor HR 5746. Please contact your representative in the U.S. House immediately to urge them to co-sponsor H.R. 5746! Call 202-225-3121 and ask for your representative by name. If you are not sure who your U.S. Representative is, please click here.

To obtain a copy of the FDIC's announcement, click here.

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