Industrial Banks Respond to Big Banks’ Misrepresentation
The National Association of Industrial Bankers (NAIB) has issued a letter and other materials in response to communications by various trade associations led by the Bank Policy Institute (BPI). In their emails and letters, these organizations made numerous allegations, without documentation, to develop support for H.R.5912 “Close the ILC Loophole Act” introduced by Representative Chuy Garcia (D-IL).
H.R.5912 is deceptive and represents a radical departure from nearly 40 years of authorized financial services policy. Since the enactment of the Competitive Equality Banking Act of 1987 (CEBA), Congress has on multiple occasions reaffirmed the current regulatory structure for Industrial Loan Corporations (ILCs), also known as industrial banks.
If the proposed H.R.5912 is signed into law, it would prohibit approval of any change of control of industrial banks, ultimately resulting in the closure or sale of all existing ILCs. Furthermore, in a blatant attempt to stifle competition and free enterprise, the proposed legislation would automatically deny pending applications not approved before September 23, 2022 and place a congressional prohibition on new ILC applicants. This extraordinary punitive action targets ILCs despite posing no risk to the U.S. financial system.
The Industrial Bank Rule approved by the FDIC in February of 2021 requires an industrial bank and its parent company to make written commitments to ensure the safe and sound operation of the industrial bank and mitigate risks. The data has consistently shown that in comparison to commercial banks, ILCs overall are better capitalized, have a higher return on assets, and are generally more profitable than banks in general.
“Multiple studies from leading academics consistently reaffirm industrial banks are the safest and soundest financial institutions in the country. These renowned authors also document the supervision provided by the FDIC and state regulators is equal to that of any other bank. After an exhaustive investigation, the U.S. Government Accountability Office (GAO) did not recommend any Congressional action regarding ILCs. Further, industrial banks are proud to be energetically engaged in CRA activities.” stated Ray Specht, Chairman, NAIB.
“In the last several weeks, attacks have been launched on industrial banks as part of the big bank agenda to stifle competition. As usual, they ignore the fact that industrial banks are the safest and soundest financial institutions in the country. Industrial banks are vigorously regulated by the FDIC and state banking departments. They must comply with every Federal law as any other bank,” stated Frank Pignanelli, Executive Director, NAIB.
NAIB is committed to fighting against H.R.5912 and the misrepresentations from anti-consumer groups. The supporting documents from NAIB in response to the BPI is available at the following links: