Why Unconventional Companies are Seeking US Banking Charters
Several non-banking entities, including General Motors and crypto firms such as Lantis and Circle, are seeking new US banking charters. This is not a move to become full-service banks, but rather a strategic decision influenced by both regulatory changes and the rise of cryptos. We delve into this intriguing trend with insights from banking reporter, David Haller.
Regulatory Changes and Their Impact
David Haller attributes this shift primarily to the Trump administration’s deregulatory push in financial services. This has led to an increased number of charter applications. Companies outside the banking sector see higher chances of gaining approval for a bank charter under the present administration. Furthermore, the recent stable coin bill’s passage has seen crypto firms regulated by the OCC, a federal bank regulator. As a result, these firms are applying for bank charters for additional credibility and compliance with the bill. The expectation is that banks will soon issue stable coins, creating competition for these firms.
Benefits of a Bank Charter to Non-Banking Companies
Non-banking companies, such as General Motors, that apply for bank charters are typically interested in novel bank charters rather than becoming full-service banks. They often seek either the FDIC’s Industrial Loan Charter, popular among automakers, or the National Trust Bank Charter, preferred by stable coin companies. These charters do not necessitate the same level of regulation as larger banks, which has sparked some discontent within the banking industry.
Why is the Banking Industry Upset?
The banking industry perceives these moves as increased competition and potential regulatory arbitrage by non-bank companies. Despite the introduction of novel charters not being inherently detrimental, there are concerns about whether these companies can perform the same operations as regular banks. This trend could lead to increased competition, potentially benefiting consumers.
Looking to the Future
As unconventional companies continue to apply for US banking charters, it remains to be seen how regulators will manage this trend. Watch this space for updates on this fascinating development in the banking sector.
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