BankDirector quoted Jonathan Pompan in an article about companies applying for more industrial bank charters and the impact on the financial services sector.
According to the article, the financial services sector is preparing for the possibility of more companies being granted industrial bank charters. In the United States, there is a strict division between commerce and banking activities, with industrial loan companies (ILCs) being a notable exception. This type of charter enables a commercial company to own a bank, with its deposits insured by the Federal Deposit Insurance Corporation (FDIC).
Currently, there are three pending applications for ILC charters, all submitted by car manufacturers. Two of these applications were filed after the new administration took office. If these charters are approved, industry experts anticipate that other companies, including fintechs, may also pursue these types of charters.
Remarking on what the industry can expect in the coming months, Pompan commented, “I do think approval of any application would indicate the FDIC is open to commercial firms getting a charter and could lead to a wave of new applications. We are already seeing fintechs, big box retailers and others with embedded finance operations considering accelerating their plans or dusting off old ILC plans, and we are only a few weeks into this administration.”
To access the article, click here.