On March 17, 2020, the Federal Deposit Insurance Corporation (FDIC) announced two significant developments relating to industrial banks (also sometimes called industrial loan companies). First, in a notice of proposed rulemaking (NPR), the FDIC laid out the regulatory regime it expects to apply to companies not subject to consolidated supervision by the Board of Governors of the Federal Reserve System (“Federal Reserve”) that seek to control industrial banks. Second, the FDIC approved applications for deposit insurance submitted by Square, Inc. and Nelnet, Inc., paving the way for these companies to establish the first de novo industrial banks in over a decade.
These two developments, taken together, signal a path forward for the use of deposit-taking industrial bank charters by companies that cannot (or do not wish to) subject themselves to the activity restrictions of the Bank Holding Company Act of 1956, as amended (the “BHC Act”).
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