The Federal Deposit Insurance Corporation (FDIC) is setting new regulations for FinTechs and industrial banks that will enhance transparency and establish record-keeping requirements, the agency said on Tuesday (March 17).
“This proposal would ensure that parent companies serve as a source of strength for their industrial bank subsidiaries,” said FDIC Chairman Jelena McWilliams. “By codifying these requirements, the proposal would enhance transparency and provide important protections for the Deposit Insurance Fund.”
The FDIC is asking for comments on a recommended regulation that would entail stricter oversight regarding industrial loan companies. The anticipated rule would pertain to “deposit insurance, change in bank control, and merger filings that involve industrial banks.”
The rules would mandate that the insured financial institution contract with the FDIC in writing and outline its relationship with the industrial bank. It would also mandate that the parent bank provide financial backing and “liquidity support.”
“The proposed rule would codify the FDIC’s current supervisory processes and policies with respect to covered industrial banks and ensure the safe and sound operation of these institutions as well as provide the necessary transparency regarding the FDIC’s supervisory practices,” the FDIC said.
The agency’s requirements also ask for particular record-keeping and mandate the reporting of information.
The U.S. has had industrial financial institutions for more than 100 years. In 1982, the government passed rules making all banks eligible for deposit insurance. In 1987, parent banks were allowed to bypass FDIC oversight and regulations.
“Filings involving industrial banks are evaluated in the same manner and under the same criteria as other institutions,” the FDIC said. “Comments on the proposed rule are due 60 days from publication in the Federal Register.”
The FDIC insures deposits for the 5,177 financial institutions operating throughout the U.S.
New York and California governors are advocating for increased state regulatory power, stating that federal supervision is careless.