Wal-Mart Financial Services has withdrawn its controversial application seeking to start its own bank.
The retailer is one among 14 companies including the Home Depot with applications before the Federal Deposit Insurance Corp. to establish what are called industrial loan corporations, or ILCs. In January, the FDIC delayed a decision on the pending applications.
Various banks, unions and consumer organizations have opposed letting giant retailers into the loan business out of concern they would drive out local financial institutions.
Wal-Mart President Jane Thompson explained why her firm withdrew its application, which it first filed in 2005, rather than wait any longer:
“Unlike dozens of prior ILC applications, Wal-Mart’s has been surrounded by manufactured controversy since it was submitted nearly two years ago. At no stage did we intend to use the ILC to establish branch banking operations as critics have suggested — we simply sought to reduce credit and debit card transaction costs,” Thompson said.
“Wal-Mart’s financial services already save customers over $245 million a year so they can live better. Since the approval process is now likely to take years rather than months, we decided to withdraw our application to better focus on other ways to serve customers. We fully intend to continue to introduce new products and services that champion those who deserve convenient, lower priced financial services.”
There are now 61 ILCs with a total of about $141 billion in assets and $98 billion in deposits. Thirty-three are based in Utah, one of only seven states that grant charters for such banks. The banks are allowed to issue credit cards, take deposits and make loans. They cannot offer standard checking accounts if the bank’s assets exceed $100 million.
In addition to Wal-Mart and The Home Depot Inc., companies awaiting FDIC approval to establish ILCs include Berkshire Hathaway Inc., The Blue Cross and Blue Shield Association, automakers Ford Motor Co. and DaimlerChrysler AG, and information services provider Ceridian Corp.
Bankers applauded Wal-Mart’s withdrawal.
“Wal-Mart’s withdrawal of its ILC application is a welcome development, but we urge Congress to continue its work to close the ILC loophole once and for all. The central concern in the ILC debate – the separation between banking and commerce – remains, even with today’s announcement,” The American Bankers Association said in a statement.
The ABA supports the Gillmor-Frank legislation that would ban all commercial ownership of ILCs.
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