The application by Rakuten—a major Japanese e-commerce company—for deposit insurance for its prospective U.S. bank subsidiary does not meet requirements imposed by the Federal Deposit Insurance Act, the American Bankers Association and the Bank Policy Institute told the FDIC in a letter today. ABA and BPI raised concerns about several aspects of Rakuten’s application for deposit insurance as a Utah-based industrial loan company, among them an “excessively narrow” business plan and the “unprecedented” sharing of bank customer information with non-financial affiliates.
“Given the unprecedented nature and scope of prime elements of the proposal, the FDIC should provide a fair opportunity for public comment, and thorough analysis of the results of such comment, before acting on the application or any similar applications involving such proposed non-financial affiliations with ILCs,” ABA and BPI wrote.
ABA is a strong advocate for charter choice, de novo banks and the ILC charter option. However, the proposed Rakuten bank would be so unlike others the FDIC has approved that it would “undermine two long-standing pillars of U.S. bank regulation—the separation of banking and non-financial businesses, and the value of consolidated supervision of banking organizations,” ABA and BPI said. “The precedential nature of this application cannot be overestimated.”