February 2, 2007
FDIC Makes Go Decision For Some ILCs; Extends Moratorium One-Year For Non-Financial ILCs
Analysis of:
More States Try to Shut Out Wal-Mart | www.banknet360.com
This analysis is solely the work of the author. It has not been edited or endorsed by GLG.
Implications: Key Implications:
Analysis: Comments/Perspective:
During the six-month moratorium the FDIC received over 13,000 comment letters from key players such as the ABA (American Bankers Association), NAR (Nat'l Association of Realtors), ICBA (Independent Community Bankers of America), PIRGs (State Public Interest Research Groups), the NRF (National Retail Federation), other special interest groups and concerned citizens who either supported or opposed the FDIC issuing ILC Charters to commercially owned companies
1. This is a major win for the banking industry who opposed granting charters to commercially owned ILCs, because they fear that commercial ILCs may begin issuing credit cards, while smaller banks are threatened by retailers like Walmart, who may offer retail banking services, thereby cutting into their market share. However, the fight is not over for retail giants like Walmart and Home Depot, who will continue their efforts to receive approval as a commercial ILC
2. It's unlikely that Walmart will receive an ILC Charter, due to the enormous public opposition in the U.S. However, Walmart is issuing credit cards in China through a partnership with GE Money, China UnionPay Card & SDB (the Shenzhen Development Bank). Additionally, Walmart received approval in Mexico to open retail banking operations, which is scheduled to launch in 2nd quarter of 2007
3. The FDIC passes the torch to Congress, who will have an opportunity during the one-year moratorium to review existing laws, and potentially push through legislation to either close or limit the loophole in the Bank Holding Company Act
After a six-month moratorium on pending ILC (Industrial Loan Corporations/Industrial Banks) applications, the FDIC Board of Directors ended speculation on 1.31.07, by announcing its decision to extend the moratorium for one-year, (until 1.31.08) for ILC applications by commercial companies and change in control notices by ILCs that would be owned by commercial companies. The moratorium doesn't apply to ILCs owned by financial companies and the FDIC will move forward with applications from financial companies.
1. In a preemptive strike two days before the scheduled hearing on 1.31.07, Representative Barney Frank (D-MA), Chairman of the House Committee on Financial Services, along with Frank Gilmor (R-OH), introduced bipartisan legislation that would prohibit all commercially owned ILCs and more than 100 members of Congress sent a letter to the FDIC asking the FDIC to extend the moratorium for at least six months
2. Currently, there are 58 ILCs that operate in seven states and 48 of those ILCs have charters in Utah, which is represented by Senator Robert Bennett (R-Utah). Should the proposed legislation pass in the House, it would go to the Senate for a vote and with the current momentum by opponents of commercially owned ILCs, they may be able to get the votes to ban commercial ILCs
1. In a preemptive strike two days before the scheduled hearing on 1.31.07, Representative Barney Frank (D-MA), Chairman of the House Committee on Financial Services, along with Frank Gilmor (R-OH), introduced bipartisan legislation that would prohibit all commercially owned ILCs and more than 100 members of Congress sent a letter to the FDIC asking the FDIC to extend the moratorium for at least six months
2. Currently, there are 58 ILCs that operate in seven states and 48 of those ILCs have charters in Utah, which is represented by Senator Robert Bennett (R-Utah). Should the proposed legislation pass in the House, it would go to the Senate for a vote and with the current momentum by opponents of commercially owned ILCs, they may be able to get the votes to ban commercial ILCs
Analysis: Comments/Perspective:
During the six-month moratorium the FDIC received over 13,000 comment letters from key players such as the ABA (American Bankers Association), NAR (Nat'l Association of Realtors), ICBA (Independent Community Bankers of America), PIRGs (State Public Interest Research Groups), the NRF (National Retail Federation), other special interest groups and concerned citizens who either supported or opposed the FDIC issuing ILC Charters to commercially owned companies
1. This is a major win for the banking industry who opposed granting charters to commercially owned ILCs, because they fear that commercial ILCs may begin issuing credit cards, while smaller banks are threatened by retailers like Walmart, who may offer retail banking services, thereby cutting into their market share. However, the fight is not over for retail giants like Walmart and Home Depot, who will continue their efforts to receive approval as a commercial ILC
2. It's unlikely that Walmart will receive an ILC Charter, due to the enormous public opposition in the U.S. However, Walmart is issuing credit cards in China through a partnership with GE Money, China UnionPay Card & SDB (the Shenzhen Development Bank). Additionally, Walmart received approval in Mexico to open retail banking operations, which is scheduled to launch in 2nd quarter of 2007
3. The FDIC passes the torch to Congress, who will have an opportunity during the one-year moratorium to review existing laws, and potentially push through legislation to either close or limit the loophole in the Bank Holding Company Act
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