WASHINGTON, D.C.—Shayna Olesiuk, Director of Banking Policy, issued the following statement on the filing of Better Markets’ Comment Letter the Federal Deposit Insurance Corporation (FDIC) in response to a proposed rule amending the regulations governing industrial banks.
“Today’s regulation framework for industrial banks disproportionately benefits a small subset of commercial companies that own these banks, therefore fostering unfair competition and potentially harming Main Street Americans and financial stability. The FDIC is now proposing much-needed action to amend the flawed 2021 regulations by recognizing the risks of industrial banks. However, the changes do not go far enough, especially in regard to existing industrial banks.
“There are currently 24 industrial banks; these account for less than 1% of the total count of FDIC-supervised banks, but together hold more than $230 billion in total assets and more than 5% of total assets. The historical loss rates for industrial banks that fail are much higher—nearly double the rate— than for other banks. Therefore, stronger and more comprehensive action is needed to address the risks posed by the statutory loophole that allows commercial firms to own industrial banks.
“We are encouraged by the FDIC’s recognition of the clear and serious risks that industrial banks bring to the financial system but, we strongly disagree that these risks should only be considered for new applications for industrial banks. Rather, these risk considerations should be applied to all industrial banks. There should also be more transparency provided to banks and the public regarding specific metrics and benchmarks that the FDIC will use to identify risky industrial banks. Finally, public hearings should be employed in all cases before approval of an industrial bank application, to ensure that the public’s voice is heard, particularly related to convenience and needs of the community.
“The American people and the US financial system deserve to be forcefully and comprehensively protected by the FDIC. This Proposal takes important steps in the right direction toward the identification of industrial bank risks and stronger oversight of them, and we encourage the FDIC to strengthen this proposal and then follow through to fully protect the public and the financial system.”
The Comment Letter is available here.
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
