Pub. 5 2017 Issue 2

22 The Community Banker www.mibonline.org R egulatory parity across the financial services sector has long been a priority for ICBA and the nation’s commu- nity bankers. While community banks labor under the yoke of burdensome rules and regula- tions, we also compete against institutions that enjoy far less stringent regulatory and tax regimes. Amid a rapid evolution in the financial services sector, with fintech firms exploring special-purpose bank charters and industrial loan corporation applications, the issue of regula- tory consistency is more relevant than ever before. ICBA has long pushed for regulatory and tax parity with institutions that enjoy govern- ment-sponsored competitive advantages, including credit unions, Farm Credit System entities and the largest financial firms. In an era of taxpayer-en- dowed funding advantages on Wall Street and ever-expanding missions at tax-exempt credit unions and FCS institutions, community banks are often the odd man out. This issue has been com- pounded by the Office of the Comptroller of the Currency’s call for applications from fintech companies to become spe- cial-purpose national banks. Not only is it unclear whether the OCC has the right to issue such a charter for these lightly regulat- ed companies, its plan to adopt different safety-and-soundness and Community Reinvestment Act standards for these institu- tions also poses regulatory and consumer-protection concerns. We continue to make the case to the OCC that any limited fintech charter must hold these firms to the same standards of safety, soundness and fairness as other federally chartered institutions. In addition to the spe- cial-purpose charter, fintechs are raising the lid on a longtime community banking concern that has remained under the radar in recent years: indus- trial loan corporations. SoFi, a fintech that offers a variety of personal-finance services, has applied for an ILC charter in Utah to offer FDIC-insured accounts and credit cards. ICBA has used this opportunity to bring to the surface our long-standing call for a much-needed policy change: closing the ILC loophole permanently. The ILC charter permitting corporate conglomerates to own banks sidesteps the longtime separation of banking and com- merce, jeopardizes the impartial allocation of credit, creates conflicts of interest, exacer- bates industry concentration and extends the federal safety net to commercial entities. ILC parent companies are unregu- lated under the Bank Holding Act, which is why it is popular among commercial interests. Meanwhile, retailers that provide insured deposit accounts and other banking products to their employees may do so without providing adequate disclosures or complying with Bank Secrecy Act and Fair Credit Reporting Act rules. The FDIC’s moratorium on new ILC charters, which was extended by the Dodd-Frank Act for three years, expired in 2013. Congress can put to rest the many concerns raised by this contentious, misguided and in- equitable policy by permanently closing the ILC loophole. Advocating equity between community banks and com- parable financial institutions with lighter regulatory and tax burdens is not anticompetitive. It is a call for a coherent financial services policy. Community banks have faced regulatory inequity for too long. A princi- ples-based regime and federal safety net commensurate to the size, risk and services provided by regulated institutions would ensure a level playing field that benefits consumers, communi- ties and the broader financial services marketplace. A CALL FOR CONSISTENCY By Camden Fine, President and CEO of ICBA Fine Points