About NAIB and Industrial Banks
NAIB champions the innovation of industrial banks to expand access to credit, guarantee consumer choice, and providing unique banking services to Americans.
- The National Association of Industrial Bankers(Any ID) is the organization that proudly represents America’s state-chartered Industrial Loan Corporations (ILC) also known as Industrial Banks.
- There are currently 29 industrial banks holding $148 Billion in total assets operating in California, Nevada and Utah. (Many other states also have industrial bank charters, but they are not active.
- Due in part to ready access to capital through diversified parent companies and efficient funding strategies, this group of banks are among the best-capitalized and most profitable banks operating in the nation today and have been so for many years.
Beginnings and Explanation
Industrial banks have existed over 100 years and operate under a number of titles; industrial banks, industrial loan banks, industrial loan corporations, thrift and loan companies. These banks engage in consumer and commercial lending on both a secured and unsecured basis. They do not offer demand checking accounts but do accept time deposits, savings deposit money market accounts and deposits that may be withdrawn through negotiable orders for withdrawal (“NOW” accounts).
Industrial banks are state charted, FDIC insured and regulated banks that can be owned by individuals or diversified companies. Industrial banks are subject to the same laws and regulations as other banks except they cannot offer commercial checking accounts.
Serving millions of Americans across the country
Industrial banks provide a broad array of products and services to customers nationwide, including some of the most under-served segments of the U.S. economy. Banks serving home improvement contractors, taxi drivers and postage buyers operate alongside some of the largest credit card and commercial finance companies in the nation – all operating under the IB charter. The CRA programs conducted by industrial banks have provided millions to community development programs and helped transform severely blighted areas in the communities they serve. Industrial banks provide a broad array of products and services to customers and small businesses nationwide, including some of the most
under-served segments of the US economy. Many industrial banks are consumer lenders, engaging in mortgage, auto, credit card and other forms of consumer lending on a nationwide basis. Others offer credit cards to small business, make commercial loans, provide financial services to truckers and one even finances taxicab medallions.
Closely and thoroughly regulated
Industrial banks are examined by the FDIC-using the same standards that apply to FDIC exams of other state chartered banks. Industrial banks also are examined by their home state regulator in the same manner as all other state banks.
Federal banking laws apply to industrial banks
Industrial banks are subject to all of the federal and state banking laws that apply to other FDIC-insured state-chartered banks. These include: Restrictions applied to transactions between an industrial bank and a company that controls it or any other company affiliated with the industrial bank; anti-tying laws that prohibit industrial banks from bundling products or services with those of their affiliates; and limits that apply to loans by industrial banks to insiders of the bank and affiliates. Industrial banks are also subject to deposit reserve requirements. The FDIC and state regulators examine commercially-owned parent companies and other affiliates to assess the relationship of such entities with the industrial bank and the effect of such relationship on the industrial bank. Industrial banks are also subject to the Community Reinvestment Act.
The strongest and safest financial service organizations in the country
For many years, quarter after quarter, the FDIC reports indicate the same consistent message: state-chartered Industrial Banks are safe and sound. The sound business plans, combined with strong capitalization requirements, provide strong support to these banks.
Did industrial banks contribute to the economic downturn?
Not at all. Industrial banks have been the best capitalized and most profitable banks in the nation. No commercially owned industrial bank has failed. Only one financial-based industrial bank that provided support to small businesses, was crippled by the economic downturn and access FDIC insurance. Despite the profitability, some federal regulators required some Industrial Banks to convert to commercial banks. In fact, during the Great Recession, Industrial Banks may have experienced a decrease of profitability, yet all but one maintain profitability. This is an incredible statement of fact demonstrating the importance of Industrial Banks to our country.
Well some people don’t like Industrial Banks
Yes, we have our critics. Some don’t like the fact that a commercial enterprise can organize an industrial bank. Others are concerned that because Industrial Banks are so innovative, they offer competition in the marketplace.
But our naysayers cannot rely on any facts to support their criticisms. Industrial banks are always among the strongest and safest financial service organizations in the country. Federal state regulators ensure the banks are well capitalized, regulated, supervised and compliant with all laws and regulations.
The future of the Industrial Banks in state-chartered institutions
Like community banks, Industrial Banks are chartered and regulated by the state holding the charter. Just like community banks, industrial Banks help small businesses, families and individuals with their credit needs. America has done well with the dual banking system that allows for large national charter and smaller state-chartered banks.
But this dynamic is in jeopardy
Every year, the FDIC claims that it is willing to process applications from new banks. Unfortunately, in the pre-application process the agency consistently establishes barriers and impossible requirements that diminish the hopes of any American hoping to organize a state chartered bank.
Indeed, the FDIC has approved insurance for new charters for just two new banks in the last two years – an outrageously small number for a $17 trillion economy. This unnecessary regulatory roadblock to economic growth has no justification or statutory basis. If the FDIC would just to obey its own rules and regulations, more banks would be chartered.
The FDIC claims that the low interest rates are preventing the development of new bank applications. Using their own formula, the low interest rates in America should be generating 30-50 new banks are year. Even the FDIC’s rationale cannot explain the current situation.
NAIB is working with fellow financial service organizations to educate Members of Congress, the media and others to the subtle attempt by the FDIC to strangle the dual banking system.
The facts are on our side. History is on our side. The American dream is on our side. We look to prevailing in this important endeavor.