FDIC Proposes Amendments to Tighten-Up ILC Regulations

The FDIC proposed amendments to "enhance the supervisory framework" on industrial banks and industrial loan companies.

The proposed rule amendments to FDIC Part 354 ("Industrial Banks") address "potential risk presented to an industrial bank subsidiary from its parent organization, including the relevant interdependencies, operational risks, and other circumstances or events that could create safety and soundness concerns." FDIC Part 354 requires written commitments in cases where an industrial bank would become a subsidiary of a company not under the supervision of the Federal Reserve Board.

The proposed changes would:

• revise the definition of "Covered Company" in FDIC Part 354 to "include conversions involving a proposed industrial bank or industrial loan company ... or other transactions as determined by the FDIC;"
• "ensure" that a (i) parent company of an industrial bank subject to a change of control or (ii) a parent company of an industrial bank subject to a merger, would be subject to FDIC Part 354 requirements;
• "provide the FDIC the regulatory authority to apply part 354 to other situations where an industrial bank would become a subsidiary of a company that is not subject to Federal consolidated supervision;" and
• establish additional criteria for assessing the risks presented to an industrial bank or industrial loan company by its parent company and affiliates. The FDIC proposed that such an evaluation would consider the institution's capacity to operate independently from the parent company and affiliates.

Comments are due within 60 days of the proposed rule's publication in the Federal Register.