The Utah Center for Financial Services at the University of Utah prepared this report to highlight the safety and soundness of Industrial Banks. Key measures of safety and soundness in banking are Capital, Asset Quality, and Profitability. We have compared levels of Capital, Asset Quality and Profitability for the US banking industry and the industrial banking sectors. The underlying financial information is drawn from the March 31, 2022 call report data for individual banks and for aggregated banking industry segments. While the banking industry is sound and safe as of March 31, 2022, the industrial bank sector continues to demonstrate superior financial strength.

The National Association of Industrial Bankers hereby responds to a recent joint trade association letter (“Joint Letter”) sent by the Bank Policy Institute (BPI), the Center for Responsible Lending (CRL), the Independent Community Bankers of America (ICBA) and other organizations. This Joint Letter calls on Congress to pass H.R. 5912, The Close the ILC Loophole Act. This letter will correct the misrepresentations made in the Joint Letter and provide you with an accurate story about Industrial Loan Corporations (ILCs).

Key measures of an insured institution’s safety and soundness are capital adequacy, asset quality and profitability. We have compiled and analyzed data related to these measures to provide an objective view of the US banking industry or a banking industry segment’s safety and soundness profile. All data is derived from FDIC quarterly call reports as of September 30, 2021.

Congress is considering eliminating the exemption for industrial loan companies (“ILCs”) from the definition of a bank under the Bank Holding Company Act (“BHCA”). State regulators believe there are several misconceptions regarding ILCs and the permissible activities of ILCs and their commercial parents.

NAIB member banks understand the importance of managing third party relationships in a safe and sound manner. We hope the comments provided will be helpful in developing well balanced and effective guidelines without regulatory burdens that may be overkill and without adequately considering the impact on the banks.

Key measures of an insured institution’s safety and soundness are capital adequacy, asset quality and profitability. We have compiled and analyzed data related to these measures to provide an objective view of the US banking industry or a banking industry segment’s safety and soundness profile.

The National Association of Industrial Bankers appreciates the opportunity to submit this statement for the record to the Subcommittee on Consumer Protection and Financial Institutions hearing on: The Future of Banking: How Consolidation, Nonbank Competition, and Technology are Reshaping the Banking System.

Key measures of an insured institution’s safety and soundness are capital adequacy, asset quality and profitability. We have compiled and analyzed data related to these measures to provide an objective view of the US banking industry or a banking industry segment’s safety and soundness profile. Industry segments in our report include: all insured institutions; industrial banks (a/k/a industrial loan companies or ILC’s); commercially-owned industrial banks; and insured institutions net of industrial banks (“Other Banks”). All data is derived from FDIC quarterly call reports as of March 31, 2021.

An honest comparison of the supervisory framework of industrial banks versus bank holding companies.

An important issue raised by some commentators is whether the lack of consolidated supervision of the parent companies of industrial banks (IBs) by the Federal Reserve is serious enough to require new legislation, such as the Close the IB Loophole Act. To gain more information regarding this issue, the U.S. House of Representatives Subcommittee on Consumer Protection and Financial Institutions held a hearing on “Banking Innovation or Regulatory Evasion? Exploring Trends in Financial Institution Charters” on April 15, 2021.

The Bank Policy Institute (BPI) recently made erroneous allegations against ILCs and industrial banks without source documentation. The following comparison provides facts and evidence about their claims.

The Utah Center for Financial Services at the David Eccles School of Business at the University of Utah commissioned the Source of Strength and Consolidated Supervision: A Comparative Assessment of Industrial Banks and Commercial Banks.

We, the undersigned companies, are writing to ask you to oppose any action that would eliminate or unduly weaken a historically strong, safe avenue for innovation and growth in the financial services industry: industrial loan corporations (ILC), also described as industrial banks.

One of the most difficult challenges industrial banks face in Washington is correcting the misinformation spread by critics, much of which is deliberately misleading. A good example is a recent article on industrial banks written by Arthur E. Wilmarth, Jr., of the George Washington University Law School.

The National Association of Industrial Bankers, the Utah Bankers Association and the Nevada Bankers Association appreciate the opportunity to submit this statement for the record of the Subcommittee on Consumer Protection and Financial Institutions hearing on “Banking Innovation or Regulatory Evasion? Exploring Trends in Financial Institution Charters.”

Key measures of an insured institution’s safety and soundness are capital adequacy, asset quality and profitability. We have compiled and analyzed data related to these measures to provide an objective view of the US banking industry or a banking industry segment’s safety and soundness profile. Industry segments in our report include: all insured institutions; industrial banks (a/k/a industrial loan companies or ILC’s); commercially-owned industrial banks; and insured institutions net of industrial banks (“Other Banks”). All data is derived from FDIC quarterly call reports as of December 31, 2020.

Key measures of an insured institution’s safety and soundness are capital adequacy, asset quality and profitability. We have compiled and analyzed data related to these measures to provide an objective view of the US banking industry or a banking industry segment’s safety and soundness profile. Industry segments in our report include: all insured institutions; industrial banks (a/k/a industrial loan companies or ILC’s); commercially-owned industrial banks; and insured institutions net of industrial banks (“Other Banks”). All data is derived from FDIC quarterly call reports as of September 30, 2020.

Most people may not be familiar with industrial banks (IBs). Yet these financial institutions have been around for more than a century and predate the establishment of the Federal Reserve in 1913. Throughout the industry’s history, the only way a non-financial firm could enter banking was through the establishment of an IB.

Bank Holding Company regulated by Federal Reserve (BHC) compared to parent of an industrial bank regulated by the bank’s state and federal regulators (IBHC).