InfoBytes Blog
FDIC finalizes industrial bank rules
On December 15, the FDIC approved a final rule (with accompanying fact sheet) that requires certain conditions and commitments for approval or non-objection to certain filings involving industrial banks and industrial loan companies (collectively, “industrial banks”), such as deposit insurance, change in bank control, and merger filings. The final rule is substantially similar to the proposed rule issued by the FDIC in March (covered by InfoBytes here) and applies to industrial banks whose parent company is not subject to consolidated supervision by the Federal Reserve Board. Specifically, the FDIC is now requiring a covered parent company to enter into written agreements with the FDIC and the industrial bank to: (i) address the company’s relationship with the industrial bank; (ii) require capital and liquidity support from the parent company to the industrial bank; and (iii) establish appropriate recordkeeping and reporting requirements. Additionally, the final rule requires prospective covered companies to agree to a minimum of eight commitments, which, for the most part, the FDIC has previously required as a condition of granting deposit insurance to industrial banks.
The final rule makes four substantive changes to the proposal: (i) requiring compliance from covered entities on or after the effective date of the rule rather than only after; (ii) requiring additional reporting regarding systems for protecting the security, confidentiality, and integrity of consumer and nonpublic personal information; (iii) increasing the threshold limiting the parent company’s representation on the board of the subsidiary industrial bank from 25 percent to less than 50 percent; and (iv) modifying the restrictions on appointments of directors and executives to apply only during the first three years of becoming a subsidiary of a covered parent company.
The final rule is effective April 1, 2021.