Industrial Banks Oppose the Anti-Consumer and Anti-Innovation “Close the Shadow Banking Act”
The National Association of Industrial Bankers (NAIB) strongly opposes the anti-consumer and anti-innovation “Close the Shadow Banking Loophole Act” introduced by Sen. Sherrod Brown (D-OH), Sen. Bob Casey (D-PA) and Sen. Chris Van Hollen (D-MD) and being promoted by the big bank trade association, the Bank Policy Institute (BPI).
The “Close the Shadow Banking Loophole Act” is just another attempt to stifle competition from industrial banks, also known as Industrial Loan Corporations (ILCs), that are safe, strong, and innovative. Millions of Americans benefit every day from the quality products industrial banks provide them. Yet, BPI advocates the elimination of these important financial services providers without a shred of evidence supporting their specious claims”, stated Frank Pignanelli, Executive Director, NAIB.
“Supporters of the legislation should be ashamed of the numerous misrepresentations and complete fabrications. Industrial banks have, for nearly forty years, been the best capitalized, most profitable, and financially strongest group of banks insured by the FDIC.”
The proposed legislation purports to close a “loophole,” but industrial banks were expressly authorized by Congress in the Competitive Equality Banking Act of 1987 (CEBA). Since then, industrial banks have established a record of fewer problems and failures than any other group of banks. Congress has, on multiple occasions, directed GAO studies and then reaffirmed the current regulatory structure for industrial banks.
The proposed legislation would prohibit the approval of any new industrial bank applications and freeze the current organization of related corporate groups by prohibiting any direct or indirect change of control of the industrial banks. This would necessitate divesting or liquidating the industrial bank. This extraordinary punitive action is deliberately designed to eliminate industrial banks despite their exemplary record and posing no risk to the U.S. financial system.
The Industrial Bank Rule approved by the FDIC in February of 2021 imposes extensive oversight of parent companies and affiliates of an industrial bank and its parent company and authority to mitigate risks. There have been no instances of problems involving industrial banks standing alone or caused by the relationship between the bank and its affiliates warranting the measures in the proposed law.
The supporting documents from NAIB are available at the following links:
Letter to Committee Leadership:
An Honest Comparison of Bank Supervision:
https://www.industrialbankers.org/resources-2/an-honest-comparison