Experts expect 'stalemate' on ILC applications
After a year when crypto tanked and regulators have become increasingly skeptical of bank-fintech partnerships, observers say the prospect of new industrial loan company applications being approved is increasingly remote.
The Federal Deposit Insurance Corp., helmed by newly confirmed chairman Martin Gruenberg, has had an inconsistent track record in recent years on granting new ILC applications, and that inconsistency is attributable largely to the different attitudes of the agency's leadership over that time.
ILCs are state-chartered and FDIC-insured depositories owned by nonfinancial companies. Fourteen companies have applied for ILC charters since 2017, but approvals of those applications were few and far between until 2020. In the first year of the pandemic, after 14 years without approvals, Block — formerly Square Financial Services — and the education financing company Nelnet Bank were granted charters by the FDIC under the leadership of former Chair Jelena McWilliams.