Yesterday, the US House Financial Services Committee (HFSC) conducted a hearing “Oversight of Prudential Regulators: Ensuring the Safety, Soundness, Diversity, and Accountability of Depository Institutions.” Federal regulators offered verbal and written testimony regarding their views on various matters confronting financial institutions. FDIC Chairman Jelena McWilliams fielded several questions regarding industrial banks, which her agency supervises.
“Several members of the HFSC inquired of the Chairman her opinion regarding industrial banks. During these exchanges, there was no dispute that industrial banks are among the safest and soundest financial institutions in the country. Further, no statements were made in the hearing to counter the fact that federal and state authorities fully regulate industrial banks,” stated Frank Pignanelli, Executive Director, The National Association of Industrial Bankers. (“Industrial Banks” is the most accurate label for these institutions.)
In response to questions, McWilliams repeated that the FDIC assesses an industrial bank application in the same manner as any other bank seeking deposit insurance. However, she did emphasize that industrial bank parents are subject to even greater requirements than other financial institutions.
McWilliams expressed to the Committee that the FDIC regulates industrial banks to the full extent of the law, including supervision of industrial bank parents. No Committee member or the Chairman presented any information that current laws are inadequate in regulating industrial banks.
“Chairman McWilliams’ comments left no doubt that the FDIC has all the tools needed to regulate industrial banks aggressively. They have been prudently applied over the years and ensured industrial banks remain a means to deliver safe and innovative financial services”, observed Ray Specht, President, The National Association of Industrial Bankers.
Phyllis Gurgevich, President of the Nevada Bankers Association, offered, “The results of the Committee discussion confirms why we are proud of all banks, including industrial banks, in Nevada. Industrial banks add diversity to charter-type and provide critical financial services to millions of Americans. Equally important, they are excellent community partners who provide opportunities to Nevadans through CRA investment and other engagements with our residents.”
Howard Headlee, President of the Utah Bankers Association, observed, “We appreciate the compliments made by the Committee members regarding the banking sector’s tireless efforts to help American families and businesses survive the pandemic. COVID-19 reminded us that we are all the same team, and now industrial banks and commercial banks are ready to lead the economic rebound the nation is experiencing. Our commitment to providing credit to families and businesses through traditional and innovative methods is unwavering.”
“One committee member admitted that industrial banks “are doing fine.” This statement underscores the difficulty detractors face when trying to argue against the industrial bank model. Their attempts reveal a blatant attempt to limit competition and restrict Americans access to credit,” added Pignanelli.