WASHINGTON — The Federal Deposit Insurance Corp. voted unanimously Wednesday to extend a moratorium on certain industrial loan company applications for another year.
The moratorium had been set to expire today.
Only applications from commercial applicants such as Wal-Mart Stores Inc. and Home Depot Inc. are subject to the ongoing ban; requests from financial companies will be processed, the FDIC said.
The agency also proposed bolstering its authority over financially owned ILCs with parent companies that not subject to coordinated federal supervision.
Four of the nine pending applications are subject to the new yearlong tabling, which is designed to give Congress time to change the law allowing commercial ownership of ILCs. Lawmakers had asked the agency to extend its moratorium by only six months.
“Public policy issues about the ownership of industrial banks by commercial companies exist today, and the extension will allow Congress a reasonable interval to determine whether and on what terms commercial companies can own industrial banks,” FDIC Chairman Sheila Bair said in her opening statement at her agency’s board meeting Wednesday. “Second, the moratorium will allow the FDIC to continue evaluating safety-and-soundness concerns that have been raised regarding industrial banks owned by commercial companies under current law.”
If Congress acted before Jan. 31, 2008, the agency would proceed “expeditiously” on any pending applications, Ms. Bair said.
Though all five board members supported extending the moratorium for commercial applicants, at least one sounded reluctant. Comptroller of the Currency John Dugan said he wanted to allow time for Congress to act, but he also said the FDIC has no authority under current law to deny an ILC application solely because it is from a commercially owned company.
“The comments we received during the last six months have provided virtually no empirical evidence to support the proposition that commercially owned ILCs are more risky than noncommercially owned ILCs,” Mr. Dugan said. “If Congress fails to change the law permitting commercial ownership of ILCs during the extension of the moratorium, and if a deposit insurance application is submitted thereafter by an ILC with commercial affiliations, I will not vote to deny the application merely because of that affiliation.”
He “strongly” urged Congress to address the issue.
To strengthen its oversight of financially owned ILCs with parents that are not overseen by a federal financial regulator, the FDIC proposed allowing its examiners to inspect the parents and its subsidiaries.
The plan also would require the parent to maintain an ILC’s capital at specified minimum levels, and the agency sought comment on whether it should also require the parent to hold a minimum level of capital, “so that we can ensure it will serve as a source of strength,” Ms. Bair said.
