October 11, 2017

ICBA urges FDIC to deny Square application

WASHINGTON, D.C -- The Independent Community Bankers of America (ICBA) has called on the Federal Deposit Insurance Corp. to deny Square Financial Services Inc.’s federal deposit-insurance application and impose an immediate two-year moratorium on ILC deposit-insurance applications. ICBA noted in a letter to the agency that Square’s application as an industrial loan corporation (ILC) is designed to avoid legal prohibitions and restrictions under the Bank Holding Company Act.

“Square should be subject to the same restrictions and supervision that any other bank holding company of a community bank is subject to,” wrote Christopher Cole, ICBA's executive vice president and senior regulatory counsel. “Furthermore, Congress should close the ILC loophole because it not only threatens the financial system but creates an uneven playing field for community banks.”

ICBA wrote that denying the application and imposing a moratorium would promote safety and soundness in the commercial banking sector and maintain the separation of banking and commerce. Square and its affiliates already engage in a diverse set of commercial activities. Granting Square an ILC charter would allow it to engage in both banking and commercial activities without being subject to consolidated supervision, ICBA noted.

ICBA’s letter calls on Congress to permanently close the ILC loophole, citing previous moratoria on ILC applications imposed by the FDIC and the Dodd-Frank Act. The association said the integration of massive technology and banking firms would result in an enormous concentration of financial and technological assets while posing significant conflicts of interest and privacy concerns. ICBA previously expressed opposition to the recent deposit-insurance application of SoFi Bank, also as an industrial loan corporation.



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