Reapplication of Edward Jones for ILC charter submitted once more
Edward Jones, a well-known financial services firm, has recently reapplied for an Industrial Loan Company (ILC) charter, having previously withdrawn its application in 2022. This move comes amidst ongoing discussions and regulatory reviews surrounding ILCs, as the firm seeks to expand its financial services offerings.
The application was submitted to the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions, and if approved, veteran banker Andrea Moss will serve as Edward Jones Bank's CEO. The bank will be headquartered in Salt Lake City.
Alison Carnie, principal and head of the banking business unit at Edward Jones, stated that an affiliated bank would allow them to better meet their clients' increasingly complex financial needs in order to achieve their long-term financial goals.
However, the regulatory environment for ILCs remains complex and somewhat unsettled. The FDIC, along with other regulators, continues to review and issue requests for information on industrial banks and their parent companies. This indicates that regulators remain vigilant about the unique business models and potential risks associated with ILCs.
Among industry participants, ILC charters are viewed with some caution due to regulatory uncertainties and the possible implications of combining banking activities with commercial enterprises. However, renewed applications suggest that some firms see strategic value in ILC charters for expanded financial services capabilities.
One of the concerns raised by opponents of the ILC charter is that it exempts companies from the definition of a "bank" under the Bank Holding Company Act, allowing them to bypass oversight by the Federal Reserve. In response, the FDIC, under former Chair Jelena McWilliams, issued a final rule requiring ILC parent companies to enter into a written agreement with the agency pledging to maintain the industrial bank's capital and liquidity "at levels that the FDIC deems necessary for [their] safe and sound operation."
Other companies, such as GM Financial, have also shown interest in ILC charters. GM Financial re-applied for an industrial loan company charter in January 2023, after initially applying in December 2020.
In addition to its ILC application, Edward Jones has announced a co-brand partnership with U.S. Bank, which will allow its advisers to offer checking and credit card products to U.S. clients later this year. This partnership could provide Edward Jones with a bridge solution while it awaits a decision on its ILC application.
The FDIC's new acting chief, Travis Hill, has highlighted ILC charters as a way to boost new bank formation, suggesting that the regulatory body may be open to supporting more applications in the future.
References: 1. Edward Jones Files for Industrial Bank Charter 2. Edward Jones Resubmits Application for Industrial Bank Charter 3. FDIC Issues Final Rule for ILC Parent Companies 4. Regulatory Views on ILC Charters 5. Sen. John Kennedy's Bill to Close ILC "Loophole" 6. Trade Groups Oppose ILC Charters 7. Mitt Romney Urges Action on ILC Charter Applications 8. FDIC Acting Chief Highlights ILC Charters
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