McWilliams: Capital, Profitability Key Focus with Prospective ILC Applicants

Issues of capital and profitability are key themes in the FDIC’s interactions with fintech companies seeking banking charters, FDIC Chairman Jelena McWilliams said today. Speaking at an FDIC conference in Arlington, Va., McWilliams provided a broad update on the agency’s conversations with prospective applicants for industrial loan company charters.

She said that conversations about regulatory capital—which must be at 8% by the third year—have been “cumbersome” as the agency educates firms that “capital doesn’t equal equity.” Determining the effect of these firms’ profitability on the deposit insurance system is also a focus of these conversations, she added. The agency is also reminding applicants “to focus on how are you going to meet community needs,” she explained during Q&A. “You will have to be able to satisfy that element of your application.”

McWilliams also emphasized that her agency is focused on “how we can encourage banks and create a regulatory environment where they can compete with that.” She highlighted the new FDIC Tech Lab—for which the agency is currently hiring—and said the agency is “trying to create a disruptor in the regulatory world.” As she has often done, McWilliams noted that many kinds of financial activity have migrated out of the regulated banking space and that regulators need to react. “We have reduced the risk in the banks, but we have not necessarily reduced that risk in the financial sector,” she said.