Rakuten withdraws ILC application, plans to refile
WASHINGTON — The Japanese e-commerce conglomerate Rakuten has withdrawn its application for an industrial bank but will refile with the Federal Deposit Insurance Corp. in the coming months, the company said.
The company's plan had drawn strong criticism from bankers about Rakuten's potentially controlling an industrial loan company while engaging in its nonfinancial businesses. Rakuten operates an online shopping platform with an emphasis on consumer rebates.
“Withdrawing the application at this time gives Rakuten an opportunity to incorporate feedback received from the FDIC, which will enhance and strengthen certain areas of our application,” a Rakuten Bank America spokesperson said. “Rakuten will continue to work constructively with the FDIC and the State of Utah to move forward with our applications.”
The move comes just days after the FDIC advanced the ball on the fate of the long-controversial industrial bank charter, which provides firms with banking powers but exempts them from holding company oversight by the Federal Reserve.
Last Tuesday, the agency proposed a new rulemaking for processing industrial bank applications. The next day, regulators approved two industrial banks for the first time in 12 years: one for Square Financial Services, and another for Nelnet Inc.
Rakuten’s application for an industrial bank attracted pushback from U.S. bankers last July, with some comparisons to Walmart’s failed bid for a bank in 2005. ILCs are one of the last bank charters still legally available to nonfinancial parent companies, but critics say applications like that of the Japanese company cross a traditional separation line between banking and commerce.
Still, the approvals for Square and Nelnet — both financial companies — have raised hopes that the FDIC is softening its approach to ILC bids. Many fintech firms that have been waiting in the wings — anxious for a foothold into the U.S. financial system that won’t require the full regulatory heft imposed on more traditional banks — are expected to file their own applications for an ILC in the coming months.