Federal government agency suggests new consumer price index and adjustments to Interagency Lending Committee rules
The Federal Deposit Insurance Corporation (FDIC) has announced a series of proposals aimed at revising its Industrial Loan Company (ILC) charter application process and adjusting Community Reinvestment Act (CRA) regulations.
The FDIC's proposals aim to ease restrictions and clarify evaluation procedures for ILC charter applications, with the intention of encouraging bank formations by commercial entities. This shift has been welcomed by some industry stakeholders as pragmatic but continues to prompt debate over oversight, regulatory reach, and community impact.
In a move that signals a more open stance towards applications from commercial firms such as Big Tech, manufacturers, and retailers, the FDIC is reverting to its previous, more permissive 2021 rules. This decision comes after the FDIC's resolution to roll back stricter Biden-era rules that required applicants to prove their independence from their parent firms and evaluate how well the ILC would meet community lending needs.
The FDIC has also issued a Request for Information (RFI) to solicit public comments on how it assesses statutory factors in ILC filings. This review aims to adapt evaluation criteria to the unique business plans of modern industrial banks.
On the CRA front, the FDIC is proposing to adjust the inflation indexing for assessment metrics. However, the focus is primarily on ILC regulation reforms, with detailed changes related specifically to the CRA receiving less emphasis in the search results.
The FDIC's proposal to rescind a 2023 revision of the CRA was made public on Tuesday. If approved, this move would revert the CRA to its 1995 standard.
Since Travis Hill became the FDIC's acting chair in January, carmaker Nissan has applied for an ILC charter, and two previous applicants - General Motors and investment firm Edward Jones - have resubmitted their paperwork. Notably, the FDIC did not approve any ILC charter applications for more than a decade before giving green lights to fintech Square (now Block) and student loan servicer Nelnet in 2020.
The FDIC also proposes creating an independent Office of Supervisory Appeals to increase transparency and consistency in the appeals process for supervision recommendations and orders. Officials in this office would serve time-limited terms to avoid long-term career goals clouding judgment.
The FDIC's proposals are open to public comment for 60 days. The American Bankers Association has called the proposal a "long-overdue step toward a more rational and modern bank regulatory framework." However, the approval prospects of ILC charters remain controversial due to concerns about the mixing of commerce and banking and potential impacts on community lending obligations.
The FDIC's proposals for revising the Industrial Loan Company (ILC) charter application process and adjusting Community Reinvestment Act (CRA) regulations indicate a shift towards a more permissive approach towards business entities, such as Big Tech, manufacturers, and retailers, in the realm of finance and banking. The proposals have sparked debates in politics and policy-and-legislation, with some viewing it as pragmatic while others express concerns about the mixing of commerce and banking and potential impacts on community lending obligations. General news outlets have followed the developments closely due to the potential ramifications on the business sector and the general public.
