FDIC Board Approves Proposed Rule to Amend the Agency’s Regulations Governing Parent Companies of Industrial Banks and Industrial Loan Companies

WASHINGTON – The Federal Deposit Insurance Corporation (FDIC) Board of Directors today approved a notice of proposed rulemaking to amend part 354 of the FDIC Rules and  Regulations governing parent companies of industrial banks and industrial loan companies (collectively referred to herein as industrial banks).  The proposed amendments would revise  part 354 to clarify and enhance the agency’s framework to supervise industrial banks, mitigate risks to the Deposit Insurance Fund, and provide necessary transparency for market participants.  

The proposed amendments would set forth additional criteria that the FDIC would consider when assessing the risks presented to an industrial bank by its parent organization and evaluating the industrial bank’s ability to function independently of the parent organization, including the shell or captive nature of an industrial bank, and its ability to meet the convenience and needs of the communities in which it does business. The proposed amendments would also clarify the relationship between written commitments and the FDIC’s evaluation of the statutory factors applicable to an industrial bank filing. 

Additionally, the proposed amendments would revise the scope of part 354 to: 

• Include conversions involving a proposed industrial bank under section 5 of the Home Owners’ Loan Act or other transactions as determined by the FDIC;
• Ensure that a parent company of an industrial bank would be subject to part 354 if there is a change of control at the parent company or a merger in which the parent company is the resultant entity; and
• Provide the FDIC the regulatory authority to apply part 354 to other situations where an industrial bank would become a subsidiary of a company that is not subject to Federal consolidated supervision.

Public comments on the proposal are due 60 days after publication in the Federal Register.