Independent Banker - April 2019 - 44

PORTFOLIO
remember ICBA's
successful camApril
24 | 1 ET/12 CT
Reciprocal Deposits
Are Growing:
Navigating the
New Regulatory
Environment
Featuring:
Tom Nelson
EVP & Chief
Investment Officer
Community Banks have many
reasons to celebrate the passing
of S. 2155. One of them
being that most reciprocal
deposits will not be treated
as brokered deposits. Better
serve all your customer base,
even public funds, with up to
$25 million in FDIC insurance
while funding your balance
sheet with attractive non-brokered
deposits.
paign against Walmart's bid for an
ILC charter in 2006. That effort by
Walmart and another by Home Depot
failed, ultimately leading to a temporary
FDIC moratorium on ILC charters
and a three-year moratorium imposed
by the Dodd-Frank Act. This current
campaign by tech firms to exploit the
ILC loophole is no different.
Level playing field
The issues of a fair and competitive
playing field, separation of banking
and commerce, and safe and sound
financial industry for Americans are
no less important now than they were
in 2006. It's simple: Any company
that wishes to own a full-service bank
should be subject to the same restrictions
and supervision that apply to
any other bank holding company.
More than a decade after the
Walmart battle, ICBA's position has
not changed: The FDIC should impose
an immediate moratorium on approving
deposit insurance for ILCs, and
Congress should close the ILC loophole
permanently.
ICBA is working to ensure that
members of Congress and financial
regulators read our white paper and
get the full story on the long, tangled
history of this obscure corner of the
financial sector. As we enter a new
chapter in the ILC saga, let's close
the book on this risky and inequitable
loophole.
The tangled history of ILCs
Dating back to 1910 with a mission to serve industrial workers, the
industrial loan company (ILC) has morphed into the fashionable
charter of choice for financial firms seeking to benefit from the federal
safety net while avoiding legal restrictions and company oversight
under the Bank Holding Company Act (BHCA).
That law was enacted in 1956 in response to the growth of
diversified bank holding companies. Its goal was separating banking
and commerce to limit concentrations of economic power, avoid
conflicts of interest and preserve the impartial allocation of credit.
The BHCA subjects bank holding companies to Federal Reserve
oversight and capital regulations. It also requires them to serve as a
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" source of strength " to their bank subsidiaries so holding companies
aren't drawing support from the banking industry safety net.
The ILC loophole cropped up in 1987, when the Competitive Equality
Banking Act exempted ILCs from the definition of " bank. " Subsequent
amendments to the BHCA, the Gramm-Leach-Bliley Act of 1999 and
the Dodd-Frank Act of 2010 have reaffirmed the separation of banking
and commerce. And moratoria on the approval of new ILC deposit
insurance applications imposed by the FDIC in 2006 and Congress in
2010 have expired.
While the FDIC has not approved an ILC applicant for deposit
insurance since 2006, several recent applications by tech companies
raise concerns that can be addressed by closing the loophole once
and for all.
http://www.Independentbanker.org
Independent Banker - April 2019

Table of Contents for the Digital Edition of Independent Banker - April 2019
