An official from a major U.S. banking industry group is scheduled to testify today at a Federal Deposit Insurance Corporation hearing on Wal-Mart’s deposit insurance application for a proposed industrial loan company in Utah, the organization said.


Art Johnson, chairman of the American Bankers Association’s Government Relations Council, is scheduled to testify at the FDIC hearing today and will oppose the application, the ABA said. Wal-Mart hopes to charter Wal-Mart Bank in Utah, according to the ABA.


“Congress has on numerous occasions reinforced the basic principle of separating banking from non-financial commerce,” said ABA witness Art Johnson, chairman and CEO of United Bank of Michigan in Grand Rapids and chairman of ABA’s government relations council, in a statement. “That issue, from a congressional and public policy viewpoint, should be considered settled.”


The ABA believes the ability of non-financial commercial firms to own ILCs (industrial loan companies) runs counter to the above-mentioned policy and raises important issues. Though ILCs have historically been small institutions, Johnson said the industry has grown dramatically in recent years.


Since 1987, aggregate growth in ILC assets has increased by over 3,500 percent, from $3.8 billion to over $140 billion in 2004, according to the ABA. The average ILC now has $2.5 billion in assets and can offer many of the same products and services as banks, the ABA said.

“The Wal-Mart application brings into focus the issues raised by the evolution of the ILC industry,” Johnson said in a statement.

“It’s clear that Wal-Mart has both a demonstrated appetite to engage in full-servicing banking and has a recent and ongoing track record of expanding the retail banking services it offers,” Johnson said. “Given this record, Wal-Mart’s application presents an unprecedented challenge to the settled policy of keeping banking separate from non-financial commerce. It risks a direct and irreparable breach of policy.”

“The combination of the world’s largest retailer having a demonstrated desire to offer full-service banking with a flexible ILC bank charter is a challenge that should not be overlooked if we want to preserve that longstanding national policy,” Johnson said. “Accordingly, the ABA opposes extending deposit insurance coverage to Wal-Mart Bank.”

The American Bankers Association’s membership includes community, regional and money center banks and holding companies, as well as savings associations, trust companies and savings banks, and it claims to be the largest banking trade association in the country.

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