美国金融服务业有一个鲜为人知的分支--工业贷款公司（ILC），也被称为工业银行，今年它引起了替代金融借贷公司的注意。虽然ILC已经存在了近一百年，但灵活的结构和合规性又一次将它带到市场前沿。SoFi、Square等专业金融科技公司在申请ILC牌照，但可能机会不大，因为这一牌照十年来还没有公司获批。该牌照允许不同类型的公司在不满足《银行控股公司法》要求的条件下拥有银行。因此，非常有必要了解一下ILC结构将如何改变银行市场游戏规则。Covington＆Burling LLP合伙人Mike Nonaka就ILC的一些重大问题作了解释。
Covington & Burling LLP是谁？
Covington & Burling LLP由法官J. Harry Covington与Edward B. Burling于1919年成立，总部设在华盛顿特区。公司聘请了1000多名律师和顾问，提供诉讼与调查、监管与公共政策、兼并与收购等领域的法律服务。其客户范围横跨各大公司与行业协会。数十年来他们也为各在线借贷公司及金融机构提供不同的监管建议。
拥有ILC的企业不受任何限制，它们既可以从事本身的商业业务，也可以从事银行业务。经营银行的公司类型通常会受限制，如商业公司可能就不被允许经营银行，但拥有ILC的企业可以免受此限制。许多商业公司和金融服务公司，如Merrill Lynch、UBS、Morgan Stanley、BMW及Harley-Davidson都创建了工业银行。
在2005年沃尔玛想要收购ILC时、Home Depot买下犹他州EnerBank时、CMS Energy Corp拥有了ILC时，关于它们的争论都大规模爆发。这些大公司的申请引起了大量负面评论，成千上万的意见信寄到FDIC，它于2006年就沃尔玛的申请举行了公开听证会。随后，98位国会议员要求暂停批准新的商业公司获得ILC。2006年7月，FDIC发出为期六个月的ILC申请暂停公告。
Upstart Network Inc.是一家使用"非传统变量（如教育和就业）预测客户信誉"的个人贷款平台，最近这家公司发生了一件具有突破性意义的事件--它收到一封"不干涉"信件。根据CFPB的说法，"这封信表明，CFPB的工作人员如今并没有依照《信贷机会均等法》向Upstart启动监督调查或进行执法行动的意图。"
SoFi和Square ILC的申请结果非常值得关注，其他公司目前也在观望FDIC和犹他州的决定。如果它们的申请获批，那么对ILC牌照感兴趣的公司会越来越多。ILC可能不会使传统实体银行终结，但它可能会催生一种全新的银行，这种银行能够在英国的挑战者银行（challenger bank）、包括Monzo、Moven在内的新兴银行（neobank）及反对ILC牌照的传统银行之间适应发展。
A little-known segment of U.S. financial services – Industrial Loan Companies (ILC), also known as industrial banks – have captured the interest of alternative lenders this year. Even though ILCs have been around for nearly 100 years, their flexible structure and compliance has brought them again to the forefront. Fintech majors like SoFi and Square have applied for this obscure charter last granted a decade ago. The charter allows diversified companies to own a bank without having to comply with the requirements of the Bank Holding Company Act. Therefore, it is imperative to understand how this ILC structure could be a game changer. Mike Nonaka, Partner at Covington & Burling LLP, addresses some of the bigger issues around ILCs.
Who is Covington and Burling LLP?
Covington & Burling LLP was founded by Judge J. Harry Covington and Edward B. Burling in 1919 and has its headquarters in Washington DC. The firm employs over 1,000 lawyers and advisers, and provides legal services in fields like litigation and investigations, regulatory and public policy, and mergers and acquisitions. Its clientele ranges from large companies to trade associations. They have also advised various online lenders and other financial institutions on different regulatory issues for decades.
What is an ILC?
An ILC is a state-chartered depository institution that is supervised by the state and Federal Deposit Insurance Corporation (FDIC), and whose deposits are insured by the FDIC. Utah industrial banks are the most popular state charters with eight out of the 10 largest ILCs. The state’s ILCs also account for 90 percent of the industry’s assets.
California, Colorado, Minnesota, Indiana, Hawaii, and Nevada are other states that have permitted ILCs at various times. Since an ILC is exempted from the definition of “bank” in the Bank Holding Company Act, a company that owns an ILC is not subject to Federal Reserve supervision, capital requirements, and a number of other regulatory requirements. This makes the ILC charter an attractive option for commercial companies interested in owning a bank, as well as for financial firms with the same interest.
A company that owns an ILC can engage in banking activities as well as in activities that are commercial in nature, since they are not subject to any restrictions. There generally are restrictions on the types of companies that can own a bank – commercial companies may not own a bank – but the owner of an ILC is exempt from this restriction. Many commercial companies and financial services firms like Merrill Lynch, UBS, Morgan Stanley, BMW, and Harley-Davidson have set up industrial banks.
The ILC Controversy
Regulators fear that mixing banking with traditional commerce will give an unfair advantage to commercial companies and a “parallel banking system” will unbalance the entire financial system of the country.
Controversy erupted when Wal-Mart wanted to acquire an ILC in 2005, and when Home Depot emerged as a buyer for Utah-based EnerBank, an ILC owned by CMS Energy Corp. Applications by these giants attracted a lot of negative attention, and thousands of comment letters were sent to the FDIC, which held a public hearing on the Wal-Mart application in 2006. Subsequently, 98 members of Congress requested a moratorium on approval of new commercially-owned ILCs. In July 2006, the FDIC issued a six-month moratorium on ILC applications.
Federal deposit insurance, access to the Federal Reserve’s discount window and payment systems, all along with the freedom to run the company’s business free from restrictions under the Bank Holding Company Act are what makes an ILC charter extremely appealing for alternative lenders. Banks are taking note of this development, as federally insured deposits would allow alternative lenders to attract savers and low-cost funds, creating competition for deposits.
SoFi’s ILC Application
It is hard to predict whether the FDIC will approve the SoFi application, submitted on June 6, 2017. But Nonaka believes that SoFi has put together a compelling application. Whether SoFi is fulfilling the statutory criteria or not will be decided by the FDIC and state regulators, and it will be interesting to see how regulators react to the public comments on the SoFi application. What makes the SoFi application so compelling in Nonaka’s eyes is the fact that the company is a mature company with established risk management controls in a lot of the areas the FDIC is concerned about. On the other hand, a former SEC head is on the record for saying SoFi’s recent scandals may put the ILC charter further out of reach for the company.
SoFi applied in June 2017, and with an equity capitalization of over $1.9 billion and almost a $170 million war chest for capitalizing bank operations, has a strong story to tell with regard to its financial resources.
Square’s ILC Application
Square applied for an ILC charter in September 2017. SoFi is an online lender whereas Square is more of a payments company, thus their applications will be judged from different angles, Nonaka said. The FDIC will evaluate Square, like other applicants, in terms of its management expertise, controls the company has in place, its business processes, and its financial stability.
Banking agencies tend to impose higher risk-based capital and liquidity requirements on new institutions. For example, regulators require a higher capital base for new institutions as compared to traditional banks already in operation. Considering that Square Inc. is a listed company with a market cap of around $11 billion, these financial uncertainties should not be insurmountable hurdles for the firm.
Varo Money provides a mobile-first banking product to consumers and has applied for a traditional national bank charter with the FDIC and the Office of the Comptroller of the Currency (OCC). If approved, they will also be able to offer insured deposits, and they will operate as any other brick-and-mortar bank.
The company is relatively young and has raised around $27 million from Warburg Pincus.
The OCC fintech charter is currently not available as compared to the ILC charter, for which the state regulator and FDIC are accepting applications. However, the OCC is in discussion stages regarding the charter. Therefore, Varo Money will not see a ruling on its application until the charter is approved.
More importantly, the OCC fintech charter does not necessitate the applicant offering FDIC-insured deposits, and any proposal for a fintech company to obtain the special purpose charter to offer such deposits also would need to apply for FDIC approval. An ILC, on the other hand, will be able to offer deposits insured by the FDIC given its charter and approval from the FDIC. Thus, in order for an OCC fintech charter applicant to have the same funding advantages as an ILC, the applicant would need to follow similar processes as applicants for an ILC.
Consumer Financial Protection Bureau (CFPB): No Action is a Good Action
One groundbreaking event that happened recently was the issuance of a “no-action” letter to Upstart Network Inc, a lending marketplace for personal loans using “non-traditional variables like education and employment, to predict creditworthiness.” According to the CFPB, “the letter signifies that Bureau staff has no present intent to recommend initiation of supervisory or enforcement action against Upstart with respect to the Equal Credit Opportunity Act.”
The CFPB playing catch up to the innovation in credit models is a good sign for fintech startups looking to leverage diverse data points for originating loans.
The Future of Fintech Banks
Nonaka believes financial regulatory reform will be of great interest to the alternative-lending ecosystem. This reform may involve Congressional legislation.
The decisions on SoFi’s and Square’s ILC applications will be noteworthy as other companies currently are waiting on the sidelines to see the FDIC’s and Utah’s decisions. Approvals of the applications will bring in even more interest in the ILC charter. It may not put an end to traditional brick-and-mortar banks, but it could lead to an all new type of bank that fits in somewhere between challenger banks in the UK and neobanks such as Monzo and Moven and the legacy banks opposing ILC charters.