WASHINGTON—Jelena McWilliams, nominated by President Trump to head the FDIC, vowed last week to address the “hold-up” in issuance of special lending licenses, potentially paving the way for companies like Walmart and fintech firms to enter the banking sector.
Fintech firms are closely watching to see if McWilliams will end the regulator’s informal moratorium on issuing Industrial Loan Company (ILC) licenses—one of the few ways non-bank companies can move into deposit-taking, Reuters reported.
In testimony before the Senate Banking Committee, McWilliams said she believed such licenses, which are overseen by the FDIC, did not pose a threat to the safety of the banking system and added that she would ensure the FDIC moved “swiftly” to consider ILC license applications, Reuters reported.
“If it meets the ILC standards as currently set up by the FDIC, I believe there should be no obstacles in the application program,” she said.
“The issuance of ILCs to the likes of car manufactures and supermarkets has been a controversial issue after the FDIC rejected Walmart’s 2005 application amid strong opposition from community banks who claimed the world’s largest retail chain might use the license to expand into other financial services,” Reuters noted.
Issuance of ILC licenses was restricted by the 2010 Dodd-Frank financial reform law, which sought to prevent banks from making the kind of risky bets that led to government bailouts during the 2007-2009 global financial crisis, Reuters noted.
That particular Dodd-Frank restriction expired in 2013 but the FDIC has not yet issued an ILC license, Reuters reported.