Proposal would set conditions, commitments for certain filings by industrial banks – including those related to deposit insurance

Certain conditions and commitments for approval or non-objection to filings involving industrial banks or loan companies (ILCs) related to deposit insurance, change in control, or mergers would be imposed under a proposal issued Tuesday by the federal insurer of bank deposits.

The Federal Deposit Insurance Corp. (FDIC) Board, in a notation vote (to observe “social distancing” in the face of the spreading coronavirus), issued the proposed rule which would apply to ILCs whose parent companies are not subject to consolidated supervision by the Federal Reserve Board.

Under the proposal, a covered parent company of an ILC would be required to enter into written agreements with the FDIC and the industrial bank to take a variety of actions. Those actions include addressing the company’s relationship with the industrial bank; requiring capital and liquidity support from the parent to the industrial bank; and establishing appropriate recordkeeping and reporting requirements.

In a release, the FDIC said the proposal would codify the FDIC’s current supervisory processes and policies with respect to covered industrial banks and “ensure the safe and sound operation of these institutions as well as provide the necessary transparency regarding the FDIC’s supervisory practices.”

According to the FDIC, Congress made all industrial banks (which have operated around the country for 100 years) eligible for deposit insurance in 1982 and excluded the parent companies from regulation and supervision by the Fed in 1987. Each industrial bank is state-chartered and supervised by the FDIC under the same regulatory and supervisory framework as other state non-member banks, the agency said. Filings involving industrial banks are evaluated in the same manner and under the same criteria as other institutions.

FDIC Seeks Comment on Proposal to Ensure Safety and Soundness of Industrial Banks