Senators Ask FDIC to Halt Approvals of Commercially Owned Industrial Banks

Ranking Member of the Senate Banking Committee Elizabeth Warren and Senator Andy Kim urged the Federal Deposit Insurance Corporation to reimpose a moratorium on deposit insurance applications submitted by commercially owned industrial loan companies ("ILCs").

In a letter to Acting FDIC Chair Travis Hill, the Senators warned that growing interest from Big Tech firms, automobile manufacturers, and large retailers threatens to erode the long-standing separation between banking and commerce. They argued that the "ILC loophole" allows commercial firms to gain access to federal deposit insurance without being subject to consolidated supervision under the Bank Holding Company Act. The Senators likened the current moment to the mid-2000s, when Walmart’s effort to obtain an ILC charter prompted widespread opposition and led the FDIC to impose a moratorium.

The Senators said that the FDIC should suspend consideration of new ILC applications to give Congress time to close the loophole. They warned that commercially owned ILCs could enable corporate parents to use insured deposits for competitive advantage—such as extending below-market loans to affiliated businesses or restricting credit to competitors—thereby distorting markets and increasing systemic risk. The Senators also argued that recent ILC applications, including those from major automakers, fail to meet statutory approval standards under the Federal Deposit Insurance Act, and do not serve identifiable community needs.

The Senators concluded that the FDIC should deny applications that fail to meet the statute’s criteria and reimpose a moratorium to safeguard competition and the integrity of the federal deposit insurance system.