Reapplication of Charter for ILC Submitted by Edward Jones
Edward Jones Re-Applies for Industrial Bank Charter
Edward Jones, a well-known financial services firm, has re-applied for an Industrial Loan Company (ILC) charter after withdrawing its previous application in 2022. This move comes amidst a changing regulatory landscape that views ILCs as a means to foster competition and innovation in the banking sector.
The renewed application reflects Edward Jones' evolving strategic and regulatory considerations. An ILC charter would allow the firm to offer full banking services, including lending and deposit-taking, without being a traditional bank holding company. This could simplify clients' financial lives and enable Edward Jones to better meet their evolving needs, as stated by Alison Carnie, the principal and head of the banking business unit at Edward Jones.
The push for ILC charters gained momentum during the Trump administration, which was known for its deregulatory stance and openness to expanding the range of entities eligible to hold ILC charters. The relaxation of certain financial regulations made ILC charters more attractive for financial firms seeking to compete with conventional banks while avoiding some of the regulatory burdens imposed on traditional bank holding companies.
Since 2017, 14 companies have submitted applications for an ILC charter. Nelnet, a student loan servicer, became the first company in several years to gain an ILC charter in 2020. If approved, Edward Jones would be led by Andrea Moss, CEO of Nelnet Bank.
The Federal Deposit Insurance Corp. (FDIC) and the Utah Department of Financial Institutions will consider Edward Jones' application. The FDIC is working to issue a request for information to address issues connected to ILC charter applications. In 2020, the FDIC issued a final rule requiring ILC parent companies to enter into a written agreement with the agency pledging to maintain the industrial bank's capital and liquidity at necessary levels for safe and sound operation.
However, the push for ILC charters has not been without controversy. Trade groups, including the Independent Community Bankers of America, have spoken out against ILCs, arguing that the designation violates the longstanding separation of banking and commerce and leaves dangerous gaps in oversight.
The FDIC's new acting chief, Travis Hill, has highlighted ILC charters as a way to boost new bank formation, in a speech this month. This suggests that the regulatory environment may continue to favour ILCs, making them an attractive option for financial firms like Edward Jones.
Edward Jones' re-application for an ILC charter in 2024 underscores the firm's commitment to this strategy. The company's headquarters will remain in Salt Lake City. Sen. John Kennedy introduced a bill in 2019 to close the loophole that allows ILCs to bypass Federal Reserve oversight, but its status remains uncertain.
Sources: 1. Edward Jones re-applies for industrial bank charter 2. The Rakutens and the Googles of the world could potentially bypass oversight by the Federal Reserve with the ILC designation 3. Nelnet Bank CEO to Lead Edward Jones Bank if Charter Approved 4. The FDIC's New Acting Chief Highlights ILC Charters as a Way to Boost New Bank Formation
Edward Jones, a financial services firm, has re-applied for an Industrial Loan Company (ILC) charter, aiming to offer complete banking services and cater better to its clients' evolving needs. The ILC designation, viewed as a means to foster competition and innovation in the banking sector, could potentially simplify clients' financial lives if approved. This strategic move echoes the push for ILC charters by financial firms, such as Nelnet, which gained an ILC charter in 2020 and was led by Andrea Moss, CEO of Nelnet Bank.
