proposal from the Federal Deposit Insurance Corporation would
lay out in detail the regulator's vision for new "industrial
loan charter" (ILC) banks, which are companies that are
chartered by states, can provide limited banking services and
receive FDIC guarantees for their deposits.
The proposed rule would codify what the FDIC had effectively
already applied to existing ILCs through contracts and
supervision, according to a senior agency official, and is aimed
at assuaging concerns from traditional banks that the firms are
too lightly regulated.
Such ILCs had been effectively put on hold by the agency for
over a decade amid opposition from banks wary of other companies
competing on their turf without the same rigorous oversight. But
FDIC Chair Jelena McWilliams has said she is willing to consider
new charters eyed by fintech firms like Square Inc and retailers
such as Rakuten Inc , which have both submitted applications.
The proposal, which the FDIC board approved Tuesday, would
codify standards already applied to existing ILCs. Newly
chartered firms would have to confirm they will be financially
backed by their parent companies, consent to FDIC examinations
and annual external audits, and agree to record-keeping
requirements, among other standards.
"This proposal would ensure that parent companies serve as a
source of strength for their industrial bank subsidiaries," said
McWilliams in a statement.
(Reporting by Pete Schroeder; Editing by Lisa Shumaker)
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