U.S. regulator proposes path for non-banks to gain deposit license


A U.S. banking regulator proposed a set of standards Tuesday for how it would consider special charters to allow non-banks to accept deposits and engage in other limited banking activities.

The proposal from the Federal Deposit Insurance Corporation would lay out in detail the regulator’s vision for new “industrial loan charter” (ILC) banks, which are companies that are chartered by states, can provide limited banking services and receive FDIC guarantees for their deposits.

The proposed rule would codify what the FDIC had effectively already applied to existing ILCs through contracts and supervision, according to a senior agency official, and is aimed at assuaging concerns from traditional banks that the firms are too lightly regulated.

Such ILCs had been effectively put on hold by the agency for over a decade amid opposition from banks wary of other companies competing on their turf without the same rigorous oversight. But FDIC Chair Jelena McWilliams has said she is willing to consider new charters eyed by fintech firms like Square Inc and retailers such as Rakuten Inc , which have both submitted applications.

The proposal, which the FDIC board approved Tuesday, would codify standards already applied to existing ILCs. Newly chartered firms would have to confirm they will be financially backed by their parent companies, consent to FDIC examinations and annual external audits, and agree to record-keeping requirements, among other standards.

“This proposal would ensure that parent companies serve as a source of strength for their industrial bank subsidiaries,” said McWilliams in a statement.