Independent Banker - August 2017 - 9

Fine Points
By Camden R. Fine, president and CEO of ICBA
A call for consistency
R
egulatory parity across the financial services
sector has long been a priority for
ICBA and the nation's community bankers.
While community banks labor under the
yoke of burdensome rules and regulations, we
also compete against institutions that enjoy far
less stringent regulatory and tax regimes. Amid
a rapid evolution in the financial services sector,
with fintech firms exploring special-purpose
bank charters and industrial loan corporation
applications, the issue of regulatory consistency
is more relevant than ever before.
ICBA has long pushed for regulatory and
tax parity with institutions that enjoy government-sponsored
competitive advantages,
including credit unions, Farm Credit System
entities and the largest financial firms. In an
era of taxpayer-endowed funding advantages
on Wall Street and ever-expanding missions at
tax-exempt credit unions and FCS institutions,
community banks are often the odd man out.
This issue has been compounded by the Office
of the Comptroller of the Currency's call for
applications from fintech companies to become
special-purpose national banks. Not only is
it unclear whether the OCC has the right to
issue such a charter for these lightly regulated
companies, its plan to adopt different safetyand-soundness
and Community Reinvestment
Act standards for these institutions also poses
regulatory and consumer-protection concerns.
We continue to make the case to the OCC that
any limited fintech charter must hold these firms
to the same standards of safety, soundness and
fairness as other federally chartered institutions.
In addition to the special-purpose charter,
fintechs are raising the lid on a longtime community
banking concern that has remained under
the radar in recent years: industrial loan corporations.
SoFi, a fintech that offers a variety of
personal-finance services, has applied for an ILC
charter in Utah to offer FDIC-insured accounts
and credit cards. ICBA has used this opportunity
to bring to the surface our long-standing call for
a much-needed policy change: closing the ILC
loophole permanently.
The ILC charter permitting corporate conglomerates
to own banks sidesteps the longtime
separation of banking and commerce, jeopardizes
the impartial allocation of credit, creates
conflicts of interest, exacerbates industry concentration
and extends the federal safety net to
commercial entities. ILC parent companies are
unregulated under the Bank Holding Act, which
is why it is popular among commercial interests.
Meanwhile, retailers that provide insured
deposit accounts and other banking products to
their employees may do so without providing
adequate disclosures or complying with Bank
Secrecy Act and Fair Credit Reporting Act rules.
The FDIC's moratorium on new ILC charters,
which was extended by the Dodd-Frank Act
for three years, expired in 2013. Congress can
put to rest the many concerns raised by this
contentious, misguided and inequitable policy by
permanently closing the ILC loophole.
Advocating equity between community banks
and comparable financial institutions with lighter
regulatory and tax burdens is not anticompetitive.
It is a call for a coherent financial services policy.
Community banks have faced regulatory inequity
for too long. A principles-based regime and federal
safety net commensurate to the size, risk and
services provided by regulated institutions would
ensure a level playing field that benefits consumers,
communities and the broader financial
services marketplace.
Follow Camden R. Fine on Twitter,
@Cam_Fine.
independentbanker.org
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Independent Banker - August 2017

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