I read a few years back WalMart was starting a bank. I though then, what aspect of life doesn't WalMart seek to profit from, expanding into every nook and cranny.
Given the changing regulatory environment, it seems like a victory that they are abandoning their attempt. The fact a discounter blasted for it's labor, competitive, and sourcing practices wanted to become America's 'trusted' banker seemed to be a bold sign of runaway corporate power concentration.
The economics of scale have seemed to have hit WalMart, too, as it's hard to grow when you are already selling $300 billion a year in goods. Maybe this is the begining of the end for their commercial rampage. Story extract on the flip.
CHICAGO (MarketWatch)- Wal-Mart Stores Inc., facing a wall of opposition from the banking industry, Congress and activist groups, said Friday it would withdraw its application to start a specialized bank.
Wal-Mart said it made the decision because a move by federal regulators to extend a moratorium on new applications for the type of bank it sought to start, known as an industrial loan corporations (ILC), would mean approval of its request would take years instead of a few months as initially expected.
The decision brings an end to nearly two years of debate between trade groups, consumer activists, lawmakers and other interest groups over Wal-Mart's plans for its ILC and the benefits of allowing such a large, non-financial company to own and operate a financial institution.
Whew. Why is this important to consumers (and the banks, no doubt)? The reasons the moratorium on ILC's is to be extended comes from the lack of regulation as summarized in this FDIC article and associated tables.
Here are some key differences between banks regulated under the Bank Holding Company Act (BHCA) and non-BHCA Banks and ILCs:
- Parent** subject to umbrella federal oversight? Banks Yes; ILCs No.
- Parent** could be prohibited from commencing new activities if a subsidiary depository institution has a CRA rating that falls below satisfactory? Banks Yes; ILCs No.
- Parent** could be ordered by a federal banking agency to divest of a depository institution subsidiary if the subsidiary becomes less than well capitalized? Banks Yes, ILCs, No.
**Parent, with respect to a state commercial bank, refers to a bank holding company or financial holding company subject to supervision by the Federal Reserve. Under a proposed rule, broker-dealers who own ILCs may soon be able to choose consolidated supervision by the Securities and Exchange Commission.
Great link from the NYTimeslooks at the politics and policies, and examines the chances the regulations will stick beyond the renewed two year ban - now that the impetus for the permanent ban on ILCs is removed [thanks robertdfineman]. Is this the WalMart version of 'laying low'? It might be interesting to note the NYTimes article identifies Home Depot among 8 entities with pending applications for the moribund ILC banking charter.