Industrial Banking and Commerce

About Industrial Banks

Fast Facts: 

  • Industrial banks do not engage in any activity not allowed for a national bank
  • Industrial bank holding companies can engage in any lawful activity – no evidence engaging in other activities presents any risk to bank
  • Affiliate transactions governed by Sections 23A and 23B – bank cannot be used to finance parent or affiliates or be subjected to any undue influence in lending decisions
  • Large diversified parent companies provide a much higher level of support to a bank subsidiary than most traditional bank holding companies
  • Capital is usually not an issue for an industrial bank as evidenced by the highest overall industry capital ratios in the nation over a 20-year period
  • Most industrial banks have no marketing or development costs – business is provided through parent – savings result in highest overall industry profit margins
  • Industrial bank model has proven successful even when parent company has financial problems – banks have been isolated from problems and continue to operate normally
  • Parent companies include some of the largest and most successful providers of credit and financial services in the nation – competence and integrity not an issue
  • Separation of banking and commerce not required until 1950s – required then because of concerns about development of large financial conglomerates that have developed anyway – ultimate effect is a barrier to capital artificially limiting growth of small and medium size banks and increasing foreign ownership of domestic banks
  • Commercial investment in banks during Great Depression was a key to rebuilding banking industry and nation’s economy – the leading banks in Michigan were organized by General Motors and Ford · Commercial investment in banks today would similarly help restore and revitalize the nation’s credit markets – the banks would be as safe and sound as any others

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