FDIC clears way for Stellantis ILC charter

• Key insight: The Federal Deposit Insurance Corp. approved Stellantis’ deposit insurance application, clearing the way for the auto giant to provide auto lending services in-house. 
• Expert quote: “Funding will primarily consist of deposits from affiliated entities, brokers, and listing services, as well as consumers and businesses nationwide via the bank’s website and mobile application.” — FDIC release 
• Supporting data: Over a dozen National Trust charters have been approved by the Office of the Comptroller of the Currency during the second Trump administration.

The Federal Deposit Insurance Corp. Thursday approved car manufacturer Stellantis’ application for deposit insurance, clearing a major hurdle to the company’s pursuit of an Industrial Loan Company charter. 

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FDIC staff in a release said the company — which owns Jeep, Ram, Dodge, Chrysler, Fiat, Alfa Romeo, Maserati and Peugeot brands, among others — will focus on providing auto-financing around the country, with a primary focus on purchasing retail installment contracts from independent Stellantis dealers. 

“Funding will primarily consist of deposits from affiliated entities, brokers, and listing services, as well as consumers and businesses nationwide via the bank’s website and mobile application,” FDIC announced in a release. “FDIC staff found that Stellantis Bank USA satisfied the statutory factors for approval [and] will be required to maintain a minimum 15% tier 1 leverage ratio, and Stellantis N.V. and two of its subsidiaries will be required to support the bank’s capital and liquidity positions.”

The move toward final approval of Stellanti’s charter comes as a number of nontraditional bank charters have been approved, including national trust charters and ILCs. The FDIC in July last year approved a resolution withdrawing a Biden-era proposed rule that required ILC applicants to prove independence from parent firms, serve community needs broadly and require public hearings on applications. 

Like traditional banks, ILCs are regulated and insured by the FDIC and may offer various loan types and deposit-like accounts. But unlike traditional bank holding companies, the parent companies of ILCs are exempt from the Bank Holding Company Act, provided they technically abstain from offering nominally demand deposit accounts. 

Banking trade groups and consumer advocates have long called ILC parent company’s nonbank designation a potential loophole that could be exploited by a large retailer to effectively offer banking services without being subject to the same consolidated supervision regime that banks are subject to. Banks have also argued that the ILC charter unnecessarily blurs the long-standing barrier between banking and commerce.

Stellantis and another auto behemoth, General Motors, submitted applications in February last year, and Nissan applied for an ILC charter in June that same year. BMW and Toyota already have such charters and Ford had its application approved in January this year.

The banking industry’s opposition to the approvals have been relatively muted, however, given that the industry has more urgent issues to contend with. Banking experts have called these ILC applications relatively “plain vanilla” charters to engage in captive auto lending, meaning the ILCs don’t in themselves represent a serious competitive threat to banks.

The same cannot necessarily be said for many of the firms applying for national trust charters in recent months. The banking industry has loudly opposed a number of such charters approved by the Office of the Comptroller of the Currency, which has granted over a dozen such charters, including to digital asset companies. 

Banking advocates like the Independent Community Bankers of America have argued the move grants crypto and fintech firms competitive advantages without the same oversight that traditional banks face. Fintech advocates say that national trust charters don’t create loopholes but instead promote competition for deposits and positive innovation. 

The debate has heated up after legal and regulatory actions have left the door open to trust companies offering yield-like incentives on consumers funds held in custody. While the OCC’s recent proposed rule implementing the GENIUS Act technically bars platforms from paying yield on stablecoins held in custody, it introduces a flexible “rebuttable” standard that lets issuers challenge the ban if they can show their third-party arrangements don’t violate the law.

Negotiations over a legal fix for the issue in a cryptocurrency market-structure legislation has been tense. A version of the bill passed the Senate Banking Committee on Thursday, but Senate Banking Committee Chairman Sen. Tim Scott, R-S.C., blocked consideration of a Democratic-led amendment that would apply a more stringent ban on yield-like rewards for stablecoin holdings.