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Notice2025-13589

Request for Information on Industrial Banks and Industrial Loan Companies and Their Parent Companies

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Published

July 21, 2025

Issuing agencies

Federal Deposit Insurance Corporation

Abstract

The Federal Deposit Insurance Corporation (FDIC) is soliciting comments from interested parties on the FDIC's approach to evaluating the statutory factors applicable to certain filings submitted by industrial banks and industrial loan companies.

Full Text

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<title>Federal Register, Volume 90 Issue 137 (Monday, July 21, 2025)</title>
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[Federal Register Volume 90, Number 137 (Monday, July 21, 2025)]
[Notices]
[Pages 34271-34276]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-13589]

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FEDERAL DEPOSIT INSURANCE CORPORATION

RIN 3064-ZA48

Request for Information on Industrial Banks and Industrial Loan
Companies and Their Parent Companies

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Request for information and comment.

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SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is soliciting
comments from interested parties on the FDIC's approach to evaluating
the statutory factors applicable to certain filings submitted by
industrial banks and industrial loan companies.

DATES: Comments must be received on or before September 19, 2025.

ADDRESSES: Interested parties are invited to submit written comments,
identified by RIN 3064-ZA48, by any of the following methods:
<bullet> Agency Website: <a href="https://www.fdic.gov/resources/regulations/federal-registerpublications/">https://www.fdic.gov/resources/regulations/federal-registerpublications/</a>. Follow the instructions for
submitting comments on the agency website.
<bullet> Email: <a href="/cdn-cgi/l/email-protection#41222e2c2c242f353201272528226f262e37">[email&#160;protected]</a>. Include RIN 3064-ZA48 in the
subject line of the message.
<bullet> Mail: Jennifer Jones, Deputy Executive Secretary,
Attention: Comments RIN 3064-ZA48, Federal Deposit Insurance
Corporation, 550 17th Street NW, Washington, DC 20429.
<bullet> Hand Delivery: Comments may be hand delivered to the guard
station at the rear of the 550 17th Street NW building (located on F
Street NW) on business days between 7 a.m. and 5 p.m.
<bullet> Public Inspection: Comments received, including any
personal information provided, may be posted without change to <a href="https://www.fdic.gov/resources/regulations/federal-register-publications/">https://www.fdic.gov/resources/regulations/federal-register-publications/</a>.
Commenters should submit only information that the commenter wishes to
make available publicly. The FDIC may review, redact, or refrain from
posting all or any portion of any comment that it may deem to be
inappropriate for publication, such as irrelevant or obscene material.
The FDIC may post only a single representative example of identical or
substantially identical comments, and in such cases will generally
identify the number of identical or substantially identical comments
represented by the posted example. All comments that have been
redacted, as well as those that have not been posted, that contain
comments on the merits of this document will be retained in the public
comment file and will be considered as required under all applicable
laws. All comments may be accessible under the Freedom of Information
Act.

FOR FURTHER INFORMATION CONTACT: Catherine Topping, Counsel, (202) 898-
3975, <a href="/cdn-cgi/l/email-protection#1073647f6060797e7750767479733e777f66">[email&#160;protected]</a>; Gregory Feder, Counsel, (202) 898-8724,
<a href="/cdn-cgi/l/email-protection#2b4c4d4e4f4e596b4d4f4248054c445d">[email&#160;protected]</a>; Rachel Harrison, Attorney, (703) 562-6471,
<a href="/cdn-cgi/l/email-protection#7c0e1d1f141d0e0e150f13123c1a18151f521b130a">[email&#160;protected]</a>, Legal Division; Scott Leifer, Senior Review
Examiner, (781) 794-5645, <a href="/cdn-cgi/l/email-protection#3a49565f535c5f487a5c5e5359145d554c">[email&#160;protected]</a>; Melanie Sheow, Review
Examiner, (202) 898-3518, <a href="/cdn-cgi/l/email-protection#3558465d505a427553515c561b525a43">[email&#160;protected]</a>, Division of Risk Management;
Federal Deposit Insurance Corporation, 550 17th Street NW, Washington,
DC 20429.

SUPPLEMENTARY INFORMATION:

I. Policy Objectives

Renewed interest in the industrial bank charter has highlighted the
need for greater clarity and transparency regarding the FDIC's approach
to evaluating the statutory factors applicable to certain filings \1\
submitted by industrial banks and industrial loan companies (together,
industrial banks).\2\ Through this request for information and comment
(RFI), the FDIC is seeking to review the nature and structure of
companies that have applied, or may in the future apply, for an
industrial bank charter and Federal deposit insurance, or for FDIC
approval or non-objection to enter into other corporate transactions
involving industrial banks, and the issues those applications and
notices may present. This review will inform potential changes to how
the agency evaluates the statutory factors in the context of the unique
aspects of industrial bank business plans and the issues presented by
the range of companies that may form an industrial bank.
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\1\ Part 354 of the FDIC's Rules and Regulations (12 CFR part
354) applies to changes in bank control subject to 12 U.S.C.
1817(j), merger transactions subject to 12 U.S.C. 1828(c), and
applications for Federal deposit insurance subject to 12 U.S.C. 1816
where the industrial bank is or would be controlled by a company
that is not subject to Federal consolidated supervision.
\2\ Herein, the term ``industrial bank'' means any insured
State-chartered bank that is an industrial bank, industrial loan
company, or other similar institution that is excluded from the
definition of ``bank'' in the Bank Holding Company Act (BHCA)
pursuant to 12 U.S.C. 1841(c)(2)(H). State laws refer to both
industrial loan companies and industrial banks. For purposes of this
RFI, the FDIC is treating the two types of institutions as the same.
The term industrial bank does not include limited purpose trust
companies and credit card banks that also are exempt from the
definition of ``bank'' pursuant to section 1841(c)(2).
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II. Background Information

The FDIC monitors, evaluates, and takes necessary action to ensure
the safety and soundness of State nonmember banks,\3\ including
industrial banks. Because industrial banks are excluded from the
definition of ``bank'' for purposes of the BHCA, a company can control
an industrial bank without being subject to the BHCA's activities
restrictions or Federal Reserve Board (FRB) supervision and regulation.
Industrial banks are otherwise generally subject to the same
restrictions and requirements, regulatory oversight, and safety and
soundness examinations as any other State nonmember bank under Federal
law. This regulatory framework includes various laws and regulations
that may affect an industrial bank's relationship to, and transactions
with, its parent and affiliates, such as restrictions under the Federal
Reserve Act governing transactions with affiliates,\4\ anti-tying
provisions of the

[[Page 34272]]

BHCA,\5\ and insider lending regulations.\6\
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\3\ See, e.g., 12 U.S.C. 1811, 1818, 1821, 1831o-1, 1831p-1.
\4\ See 12 U.S.C. 1828(j)(1)(A); 12 CFR part 223.
\5\ For purposes of section 106 of the BHCA, an industrial bank
is treated as a ``bank'' and is subject to the anti-tying
restrictions therein. See 12 U.S.C. 1843(h)(1).
\6\ See 12 CFR 337.3.
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A. The Industrial Bank Charter

Under the Federal Deposit Insurance Act (FDI Act), industrial banks
are ``State banks,'' \7\ and all the existing FDIC-insured industrial
banks are ``State nonmember banks.'' \8\ As a result, the FDIC is the
appropriate Federal banking agency for industrial banks.\9\ Each
industrial bank is also regulated by its respective State chartering
authority.
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\7\ 12 U.S.C. 1813(a)(2).
\8\ 12 U.S.C. 1813(e)(2). Historically, industrial banks have
elected not to become members of the Federal Reserve System.
\9\ 12 U.S.C. 1813(q)(2).
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The Competitive Equality Banking Act of 1987 (CEBA) excluded
industrial banks from the definition of ``bank'' in the BHCA.\10\ As a
result, a company can control an industrial bank without causing that
company to be a bank holding company subject to the BHCA's activities
restrictions or FRB supervision and regulation.
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\10\ Public Law 100-86, 101 Stat. 552 (Aug. 10, 1987).
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B. 2020-2021 Rulemaking--Part 354

On February 23, 2021, the FDIC published a final rule governing the
parent companies of industrial banks, codified at 12 CFR part 354 of
the FDIC Rules and Regulations (part 354), which took effect on April
1, 2021.\11\ Part 354 codified the FDIC's practice of requiring, in
connection with certain filings, certain conditions and written
commitments for each deposit insurance application approval, non-
objection to a change in control notice, and merger application
approval that would result in an industrial bank becoming a subsidiary
of a company that is not subject to Federal consolidated supervision.
Part 354 also requires that, before any industrial bank may become a
subsidiary of a company that is not subject to Federal consolidated
supervision, such industrial bank and parent company must enter into
one or more written agreements with the FDIC. Additionally, part 354
requires the FDIC's prior written approval for certain actions proposed
by the industrial bank, such as making a material change in its
business plan. Part 354 applies to any industrial bank that becomes a
subsidiary of a company not subject to Federal consolidated supervision
as a result of a change in bank control or merger, or that is granted
deposit insurance, on or after April 1, 2021.
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\11\ 86 FR 10703 (Feb. 23, 2021).
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C. Industry Profile

Industrial banks have existed since Arthur Morris established the
Fidelity Savings and Trust Company of Norfolk, Virginia, in 1910. These
State-chartered and -supervised entities operated like finance
companies, providing loans to wage earners who could not otherwise
obtain credit in an era when commercial banks typically did not offer
this type of credit. In the mid-1980s, commercial firms became
increasingly interested in chartering industrial banks and other types
of institutions that were excluded from the BHCA's definition of
``bank.'' \12\ When CEBA was enacted in 1987, CEBA generally made all
banks that were insured by the FDIC ``banks'' for the purposes of the
BHCA, with certain exceptions, including industrial banks that meet
certain statutory requirements.\13\
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\12\ At that time, the BHCA defined a bank as an entity that
both made commercial loans and accepted demand deposits. If an
entity performed only one of these tasks, it was not a bank under
the BHCA. 12 U.S.C. 1841(c) (1986). Such an entity became known as a
``nonbank bank'' because it was not a bank for BHCA purposes, yet it
was a bank for other purposes, including, for example, deposit
insurance. As a result, a company that controlled a nonbank bank was
not subject to regulation and supervision as a bank holding company.
\13\ See 12 U.S.C. 1841(c)(2)(H).
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The industrial bank industry has evolved since the enactment of
CEBA. The industry experienced significant asset growth between 1987
and 2006 when total assets held by industrial banks grew from $4.2
billion to $213 billion.\14\ The Government Accountability Office
reported in 2012 that ``[t]he ILC industry experienced significant
asset growth in the 2000s, and ILCs evolved from small, limited-purpose
institutions to a diverse group of insured financial institutions with
a variety of business lines.'' \15\ The ownership structure and
business models of industrial banks evolved as industrial banks were
acquired or formed by a variety of firms, including, among others, BMW,
Target, Pitney Bowes, and Harley Davidson.
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\14\ Most of the growth during this period is attributable to
financial services firms that controlled industrial banks offering
sweep deposit programs to provide Federal deposit insurance for
customers' available cash balances and to a large credit card issuer
moving its credit card operations from its Delaware-chartered credit
card bank to its Utah-chartered industrial bank.
\15\ U.S. Government Accountability Office, GAO-12-160,
Characteristics and Regulation of Exempt Institutions and the
Implications of Removing the Exemptions 13 (Jan. 2012), available at
<a href="https://www.gao.gov/products/GAO-12-160">https://www.gao.gov/products/GAO-12-160</a>.
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For instance, certain companies established industrial banks, in
part, to support the sale of the manufactured products (e.g.,
automobiles) or other services, whereas certain retailers established
industrial banks to issue general purpose credit cards. Lending
programs offered by these companies for their products and services are
funded, at least in part, by FDIC-insured deposits, which typically
come at a lower cost compared to other forms of funding.
In addition, certain companies also formed or acquired industrial
banks to provide access to Federal deposit insurance for brokerage
customers' cash management account balances. The cash balances their
customers maintain with a securities affiliate are swept into insured,
interest-bearing accounts at the industrial bank subsidiary, thereby
providing the brokerage customers with FDIC-insured deposits while that
cash is held for future investment.
In 2005, Wal-Mart Bank's application for Federal deposit insurance
drew extensive public attention to the industrial bank charter.\16\ In
2006, The Home Depot filed a change in control notice in connection
with its proposed acquisition of a Utah chartered industrial bank.
Numerous public comments were received with respect to both filings,
which were ultimately withdrawn. Thereafter, on July 28, 2006, the FDIC
imposed a six-month moratorium on FDIC action with respect to deposit
insurance applications and change in control notices involving
industrial banks.\17\ Also, on August 23, 2006, the FDIC published a
notice and request for comment on a wide range of issues concerning
industrial banks.\18\ The moratorium was effective through January 31,
2007, at which time the FDIC extended the moratorium one additional
year for deposit insurance applications and change in control notices
for industrial banks that would be owned by commercial companies.\19\
The moratorium was not applicable to

[[Page 34273]]

industrial banks to be owned by financial companies. In 2010, through
passage of the Dodd-Frank Act, Congress imposed a three-year moratorium
on the FDIC's approval of deposit insurance applications or non-
objection to any change in control for industrial banks that would be
owned or controlled by a commercial firm.\20\ The moratorium expired in
July 2013, without any further action by Congress.
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\16\ See FDIC, Industrial Loan Companies and Industrial Banks
Comments, available at <a href="https://fdic.gov/federal-register-publications/industrial-loan-companies-and-industrial-banks-comments">https://fdic.gov/federal-register-publications/industrial-loan-companies-and-industrial-banks-comments</a>.
\17\ See Moratorium on Certain Industrial Loan Company
Applications and Notices, 71 FR 43482 (Aug. 1, 2006).
\18\ See Industrial Loan Companies and Industrial Banks, 71 FR
49456 (Aug. 23, 2006). The notice included questions concerning the
risk profile of the industrial bank industry, safety and soundness
issues uniquely associated with ownership of such institutions, the
FDIC's practice with respect to evaluating and making determinations
on industrial bank applications and notices, whether a distinction
should be made when the industrial bank is owned by an entity that
is commercial in nature, and the adequacy of the FDIC's supervisory
approach with respect to industrial banks.
\19\ See Moratorium on Certain Industrial Bank Applications and
Notices, 72 FR 5290 (Feb. 5, 2007).
\20\ Public Law 111-203, title VI, section 603(a), 124 Stat.
1597 (2010). Section 603(a) also imposed a moratorium on FDIC action
on deposit insurance applications by credit card banks and trust
banks owned or controlled by a commercial firm. The Dodd-Frank Act
defined a ``commercial firm'' for this purpose as a company that
derives less than 15 percent of its annual gross revenues from
activities that are financial in nature, as defined in section 4(k)
of the BHCA (12 U.S.C. 1843(k)), or from ownership or control of
depository institutions.
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Since 2008, there have been three newly established industrial
banks. Applications from Nelnet Bank, Draper, Utah, and Square
Financial Services, Inc., Salt Lake City, Utah, were approved in March
2020 and the industrial banks became FDIC-insured in November 2020 and
March 2021, respectively. Most recently, the FDIC approved an
industrial bank deposit insurance application from Thrivent Bank, Salt
Lake City, Utah, on June 20, 2024, and the bank commenced operations on
June 1, 2025. As part of the approvals, the FDIC required each
industrial bank and their parent companies to enter into written
agreements with the FDIC that contained provisions consistent with the
requirements of part 354.
As of March 31, 2025, there were 23 industrial banks \21\ with
$247.4 billion in aggregate total assets. Of those 23 industrial banks,
one institution, UBS Bank USA, representing $116.3 billion in total
assets, is controlled by a bank holding company subject to FRB
supervision. Six industrial banks reported total assets of $10 billion
or more; eight industrial banks reported total assets of $1 billion or
more but less than $10 billion; and the remaining nine reported total
assets of less than $1 billion. The industrial bank sector today
includes a diverse group of insured financial institutions operating a
variety of business models. A significant number of the existing
industrial banks support the commercial or specialty finance operations
of their parent company and are funded through sources other than core
deposits.
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\21\ Of the 23 industrial banks existing as of March 31, 2025,
15 were chartered in Utah, three in Nevada, three in California, one
in Hawaii, and one in Minnesota. As noted below, one additional
industrial bank opened on June 1, 2025.
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D. Supervision Framework

Because industrial banks are insured State nonmember banks, they
are subject to the FDIC Rules and Regulations applicable to State
nonmember banks, as well as other provisions of law, including
restrictions under the Federal Reserve Act governing transactions with
affiliates,\22\ anti-tying provisions of the BHCA,\23\ and insider
lending regulations.\24\ Industrial banks are also subject to regular
examination, including examinations focused on safety and soundness;
anti-money laundering and countering the financing of terrorism
compliance; compliance with consumer protection laws and regulations,
including those related to fair lending; the Community Reinvestment
Act; information technology; and trust services. Pursuant to section
10(b)(4) of the FDI Act, the FDIC has the authority to examine the
affairs of any industrial bank affiliate, including the parent company,
as may be necessary to determine the relationship between the
institution and the affiliate, and the effect of such relationship on
the depository institution.\25\
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\22\ See 12 U.S.C. 1828(j)(1)(A); 12 CFR part 223.
\23\ For purposes of section 106 of the BHCA, an industrial bank
is treated as a ``bank'' and is subject to the anti-tying
restrictions therein. See 12 U.S.C. 1843(h)(1).
\24\ See 12 CFR 337.3.
\25\ 12 U.S.C. 1820(b)(4).
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In addition, under section 38A(b) of the FDI Act,\26\ the FDIC is
required to impose a requirement on companies that directly or
indirectly own or control an industrial bank to serve as a source of
financial strength for that institution.\27\ Subsection (d) of section
38A provides explicit statutory authority for the appropriate Federal
banking agency to require reports from a controlling company to assess
the ability of the company to comply with the source of strength
requirement, and to enforce compliance by such company.\28\
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\26\ Public Law 111-203, 124 Stat. 1616 (July 21, 2010),
codified at 12 U.S.C. 1831o-1(b).
\27\ 12 U.S.C. 1831o-1(b).
\28\ 12 U.S.C. 1831o-1(d).
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In granting deposit insurance, the FDIC must consider the factors
in section 6 of the FDI Act; these factors generally focus on the
safety and soundness of the proposed institution and any risk it may
pose to the Deposit Insurance Fund (DIF).\29\ The Change in Bank
Control Act and the Bank Merger Act each have their own factors that
the FDIC must consider.\30\
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\29\ Such factors are the financial history and condition of the
depository institution, the adequacy of the depository institution's
capital structure, the future earnings prospects of the depository
institution, the general character and fitness of the management of
the depository institution, the risk presented by such depository
institution to the DIF, the convenience and needs of the community
to be served by such depository institution, and whether the
depository institution's corporate powers are consistent with the
purposes of the FDI Act. See 12 U.S.C. 1816.
\30\ The Change in Bank Control Act provides that the FDIC may
disapprove a proposed acquisition if it would be monopolistic or
anti-competitive in such a manner that the public interest or
convenience and needs of the community do not outweigh the anti-
competitive effect; either the financial condition of any acquiring
person or the future prospects of the institution is such as might
jeopardize the financial stability of the bank or prejudice the
interests of the depositors of the bank; the competence, experience,
or integrity of any acquiring person or of any of the proposed
management personnel indicates that it would not be in the interest
of the depositors of the bank, or in the interest of the public to
permit such person to control the bank; any acquiring person
neglects, fails, or refuses to furnish the FDIC all the information
required by the FDIC; or the FDIC determines that the proposed
transaction would result in an adverse effect on the Deposit
Insurance Fund. See 12 U.S.C. 1817(j)(7). The Bank Merger Act
generally prohibits the approval of monopolistic or otherwise
anticompetitive transactions, and requires the responsible agency to
consider, the financial and managerial resources and future
prospects of the existing and proposed institutions, the convenience
and needs of the community to be served, the risk to the stability
of the United States banking or financial system, and the money
laundering record of insured depository institutions involved in the
merger transaction. See 12 U.S.C. 1828(c).
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Part 354 requires capital and liquidity maintenance agreements
(CALMAs) and other written agreements between the FDIC, industrial
banks, and controlling parties of industrial banks, as well as the
imposition of prudential conditions when approving or non-objecting to
certain filings involving an industrial bank. Many of part 354's
provisions reflected the FDIC's prior experience in reviewing
industrial bank filings.
As noted above, the universe of industrial banks is relatively
small. For the most part, the existing industrial banks (all but three
became FDIC-insured between 1984 and 2006) fared similarly to other
types of financial institutions during previous banking crises.\31\ Of
the 24 industrial banks, six are subject to written agreements (two are
subject to capital maintenance agreements, one is subject to only a
CALMA, and three are subject to both CALMAs and parent company
agreements).\32\ More recently, a wide

[[Page 34274]]

variety of firms have expressed interest in establishing industrial
banks.
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\31\ During the 2008-09 Financial Crisis, several parent
companies pursued conversions of an industrial bank to a commercial
bank, which required approval of the parent company to become a BHC
subject to regulation and supervision by the FRB. The conversions
allowed the respective companies to access programs such as the
FDIC's Temporary Liquidity Guarantee Program and the Troubled Asset
Relief Program administered by the Department of the Treasury.
\32\ Previously 10 other industrial banks (that have since
merged, converted, or voluntarily liquidated) were also subject to
CALMAs and/or parent company agreements. The FDIC began imposing
additional prudential requirements in Orders granting Federal
deposit insurance in March 2004. The FDIC described its imposition
of additional prudential requirements in FDIC: The FDIC's
Supervision of Industrial Loan Companies: A Historical Perspective--
Summer 2004 Vol. 1, Issue 1. GAO further described the FDIC's
approach in pages 41-44 of its 2005 audit, Industrial Loan
Corporations: Recent Asset Growth and Commercial Interest Highlight
Differences in Regulatory Authority, available at <a href="https://www.gao.gov/products/gao-05-621">https://www.gao.gov/products/gao-05-621</a>.
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E. Other Considerations

Previously withdrawn applications by proposed industrial banks
have, in some instances, presented challenges to the evaluation of the
statutory factors. For example, Wal-Mart Bank's application to form an
industrial bank led to extensive concerns regarding the potential anti-
competitive effects of the proposal and whether it was consistent with
the purpose of the industrial bank charter. Increased interest in
forming an industrial bank controlled by foreign parents has raised
concerns, including those related to cross-jurisdictional challenges,
organizational complexities, and data governance and privacy.
Commenters have also raised concerns with industrial banks whose
business plans are wholly dependent on the operations, products,
services and customers of the parent.
The FDIC is actively reviewing many of these issues and proposes to
comprehensively review the nature and structure of companies that have
applied or may apply for an industrial bank charter and Federal deposit
insurance and the issues those applications could present in the
context of the FDIC's evaluation of the applicable statutory factors.
Public comments will inform the FDIC's policy approach to industrial
bank filings.

III. Request for Comment

Specifically, the FDIC is soliciting comments as follows:

A. Information Relevant to Evaluation of Applicable Statutory Factors

Section 6 of the FDI Act requires the FDIC to consider the
following statutory factors when reviewing an application for deposit
insurance, including from a proposed industrial bank:
<bullet> The financial history and condition of the depository
institution;
<bullet> The adequacy of the depository institution's capital
structure;
<bullet> The future earnings prospects of the depository
institution;
<bullet> The general character and fitness of the management of the
depository institution;
<bullet> The risk presented by such depository institution to the
DIF;
<bullet> The convenience and needs of the community to be served by
such depository institution; and
<bullet> Whether the depository institution's corporate powers are
consistent with the purposes of this chapter.
The FDIC also considers filings from companies seeking to acquire
an industrial bank through a change in control or merger transaction.
The FDIC considers the statutory factors applicable to each filing it
receives.\33\ For filings subject to FDIC non-objection or approval
under the Change in Bank Control Act or the Bank Merger Act, the FDIC
is required to consider statutory factors set forth in each of those
statutes.\34\
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\33\ See notes 29, 30 above.
\34\ See 12 U.S.C. 1817(j) and 1828(c).
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1. General
1. How should the FDIC apply the statutory factors of the FDI Act
to industrial bank applications? In what ways, if any, should the
statutory factors be applied differently to industrial bank applicants
than to other types of applicants? Which factors in particular and why?
2. How should the FDIC's evaluation of the statutory factors be
tailored based on the size, complexity, and nature of the parent and
affiliates of a proposed industrial bank?
3. How should the FDIC tailor its analysis if the parent of a
proposed industrial bank is (1) a retail company, (2) a company that is
financial in nature, (3) a manufacturing or other industrial company,
or (4) a technology company?
4. How should the FDIC analyze an application in which an affiliate
of a proposed industrial bank already provides the same lending (or
other) services the proposed industrial bank would provide to customers
of the parent organization?
2. Adequacy of Capital Structure
5. How should the FDIC assess an industrial bank applicant's
capital adequacy? How should this assessment compare to other types of
depository institutions?
3. Risk to the DIF
6. How should the FDIC assess an industrial bank applicant's risk
to the DIF? Do certain industrial bank applicants' proposed business
models, including those that involve significant or material reliance
on their parent company--e.g., for the generation of deposit funding or
the acquisition of lending assets--present unique risks to the DIF? How
does material reliance on a parent company that is generally understood
to be financial in nature compare to material reliance on a parent
company that is generally understood to be non-financial in nature
(including in the non-industrial bank context)? What different
considerations, if any, come into play in evaluating these different
types of parent companies?
7. How should the size and market share of the parent company and
its affiliates and the diversity of products and services they offer
relate to the risk presented by the proposed industrial bank? How
should the FDIC analyze this in the context of an industrial bank
application?
8. Do industrial banks present different types of resolvability
concerns depending on the nature of the parent company and its
affiliates or the business plan of the industrial bank? To what extent
do such concerns vary depending on whether the parent and its
affiliates are (1) retail companies (including internet-based); (2)
companies that are generally understood to be financial in nature
(e.g., insurance companies and credit providers) (3) manufacturing
companies (auto, agricultural); (4) companies based/domiciled in a
foreign jurisdiction; or (5) financial or other technology companies?
If so, please explain how. How should such concerns factor into the
FDIC's analysis of industrial bank applications, particularly with
respect to risk to the DIF?
9. To the extent an industrial bank presents a heightened level of
risk to the DIF, are there mitigants the FDIC should consider? For
example, should the FDIC require the industrial bank and/or corporate
parent of such an industrial bank to submit resolution plans,\35\
impose growth restrictions, or impose activities or other restrictions
as a condition of approval? To what extent are these conditions, or
others, satisfactory mitigants?
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\35\ Part 354 includes a provision whereby FDIC may require a
Covered Company and industrial bank to commit to provide to the
FDIC, and implement and adhere to, a contingency plan that sets
forth recovery actions to address significant financial or
operational stress that could threaten the safe and sound operation
of the industrial bank and strategies for the orderly disposition of
such industrial bank without the need for the appointment of a
receiver or conservator. 12 CFR 354.4(b).
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4. Convenience and Needs of the Community
10. How should the FDIC assess the convenience and needs of a
community

[[Page 34275]]

to be served by an industrial bank applicant? How should this
assessment compare to other types of depository institutions?
11. If forming an industrial bank would enable the parent company
or its affiliates to offer products and services (including the
provision of credit) at a reduced cost, should the related consumer
benefits be viewed favorably for purposes of the convenience and needs
factor?
12. If a proposed industrial bank provides lower-cost credit for
purposes of purchasing products that are essential to American
households or commercial firms, how should this be considered for
purposes of the convenience and needs factor?
5. Whether the Depository Institution's Corporate Powers Are Consistent
With the Purposes of This Chapter
13. How should the FDIC assess whether an industrial bank
applicant's corporate powers are consistent with the purposes of the
FDI Act? Are there certain types of applications that implicate this
statutory factor?
6. Other Statutory Factors
14. How should the FDIC assess the other statutory factors under
the FDI Act, Change in Bank Control Act, and Bank Merger Act with
respect to a filing involving a proposed industrial bank?

B. Characteristics of Industrial Bank Parent Companies

The FDIC is seeking comment on certain characteristics of potential
industrial bank parent companies.
1. Foreign-Owned Industrial Banks
15. Do applications relating to industrial banks controlled by
foreign parent companies present unique considerations? If so, what are
those considerations? Are there different types of foreign parents that
present different issues?
16. Are there mitigants the FDIC could consider with respect to
foreign-based parent companies? For example, should a foreign parent be
required to pre-position resources (e.g., capital, liquidity) in the
United States for the benefit of the industrial bank? If so, how could
such a pre-positioning requirement be structured? What other measures,
if any, should the FDIC consider to address concerns raised by foreign
ownership?
2. Size and Market Share
17. How should the FDIC evaluate industrial bank applicants with
parents that are dominant in one or more nonfinancial industries? To
what extent should this analysis depend on (a) the size and market
share of the parent, (b) the businesses the parent company is engaged
in, and (c) the proposed size and proposed business model of the
industrial bank?
18. With respect to the proposed business model of an industrial
bank applicant with a large parent that dominant in certain markets,
how should the FDIC view proposals to establish a full-service bank
serving customers nationwide, a ``captive'' bank serving only customers
of the parent company, or other models?
19. Does an industrial bank with a parent of a certain size and/or
market share have a greater ability to scale? To what extent should
this be viewed positively or negatively? What potential impact would
this have on the banking industry and the provision of banking services
in the United States? Please explain the characteristics of such
companies, and whether and how such considerations should influence the
FDIC's analysis of such applications.
20. What tools can the FDIC use to address such concerns, if any?
Can/should the FDIC consider imposing size, product, and activity
limits on an industrial bank as a condition of the approval or non-
objection order? If so, what type of limitations would be appropriate?
How should such limitations be structured, implemented, and enforced
over the long term?
21. Would a larger, more complex parent with diverse product lines
(e.g., retail e-commerce, cloud hosting, AI, etc.) be better able to
weather economic downturns and thus be better able to serve as a source
of strength to the industrial bank? On the other hand, could a bank in
a larger corporate organization be subject to inattention or low
prioritization by a parent?
22. How should the FDIC view the potential benefits that may stem
from the extension of affordable banking/credit products and services
from an industrial bank with a large parent company dominant in certain
markets?
23. How should the FDIC view the costs and risks that may stem from
an industrial bank with a large parent company dominant in certain
markets? What impact would such institutions have on the competitive
landscape for banking?
3. Non-Financial Companies
24. What are the potential societal costs and benefits of
permitting companies that are generally non-financial in nature to
establish an industrial bank? How should such costs and benefits be
factored into the FDIC's analysis of the statutory factors? Are there
approaches the FDIC can pursue to mitigate any potential societal
costs?
25. What are the advantages and disadvantages of retail companies
forming industrial banks?
26. What are the advantages and disadvantages of manufacturing and
other industrial companies forming industrial banks?
27. What are the advantages and disadvantages of technology
companies forming industrial banks?
28. To the extent nonfinancial companies are already offering
financial products and services, how should this impact the FDIC's
framework for analyzing industrial bank applicants?
29. If nonfinancial companies begin offering payment stablecoins,
how, if at all, should that impact the FDIC's analytical framework?
30. Do nonfinancial companies present particular privacy or data
protection issues? When, if at all, would it be appropriate for the
FDIC to consider imposing heightened requirements specific to
industrial banks and nonfinancial parent companies and affiliates
regarding the use of consumer financial data for commercial purposes?
4. Other Considerations
31. Should the FDIC consider factors such as funding sources and
degree of leverage for purposes of determining the ability of the
parent to serve as a source of strength? For example, are publicly
traded and/or less-levered firms better able and more likely to serve
as a source of strength to a subsidiary industrial bank in comparison
to private and/or more-levered firms? What other aspects of the
parent's funding profile should be considered for this purpose, e.g.,
contingent lines of credit, on-balance sheet liquidity?
32. What conditions should the FDIC consider including in an order
of approval or non-objection to ensure the parent company for an
industrial bank serves as a source of strength? Should these conditions
be tailored to the size and complexity of the parent and the types of
products and services it provides and, if so, how? Should certain
enhanced conditions apply to parent companies that meet or exceed a
certain size or complexity threshold? If so, what should they be and
why?

C. Existing Regulatory and Supervisory Framework

As noted above, while industrial bank parents are not necessarily
subject to the BHCA and Federal consolidated supervision, industrial
banks are otherwise subject to the same restrictions and requirements,

[[Page 34276]]

regulatory oversight, and safety and soundness exams as any other kind
of insured depository institution.
33. In general, how effective is the regulatory and supervisory
framework for industrial banks? To what extent, if at all, should the
existing regulatory and supervisory framework inform the FDIC's
evaluation of applications?
34. How effective are existing restrictions that apply to
industrial banks, such as Sections 23A and 23B of the Federal Reserve
Act and Regulation W, and limits on lending to a single counterparty?
Are there modifications that can be made to those restrictions--through
policymaking or in the form of nonstandard conditions--to better
address potential concerns?

D. General Request for Information and Comment

35. The FDIC requests all comments regarding the industrial bank
charter and supervision of industrial banks. To the extent possible,
provide specific examples, including data, to support or illustrate
your comments.

Federal Deposit Insurance Corporation.

By order of the Board of Directors.

Dated at Washington, DC, on July 15, 2025.
Debra A. Decker,
Executive Secretary.
[FR Doc. 2025-13589 Filed 7-18-25; 8:45 am]
BILLING CODE 6714-01-P

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