Industrial loan banks are FDIC-regulated depository institutions chartered under the laws of Utah, California, Colorado, Nevada, and Minnesota[1].  More than 50 industrial loan banks are currently in operation, principally in Utah and California. (Click here for a list of Utah State Chartered Industrial Banks.) Several applications to charter additional banks are under consideration.  

Industrial loan banks are subject to the same banking laws and are regulated in the same manner as other depository institutions. They are supervised and examined both by the states that charter them and by the FDIC. They are subject to the same safety and soundness, consumer protection, deposit insurance, Community Reinvestment Act, and other requirements as other FDIC-insured depository institutions.   

Most owners of industrial loan banks are exempted from Federal Reserve Board supervision as bank holding companies.  (Similar Bank Holding Company Act exemptions apply to thousands of institutions not owned by other companies, and to   financial institutions that do not offer a full range of banking services, such as credit card banks, Edge Act banks, grandfathered “nonbank banks”, grandfathered “unitary thrifts”, and trust banks.) These exemptions benefit bank customers by introducing additional competition into the marketplace without increased risk to the deposit insurance system.    

Though not required to be regulated as federal bank holding companies, owners of industrial loan banks are not “unregulated.” They are subject to many of the same requirements as bank holding companies, such as strict restrictions on transactions with their bank affiliates. They are regulated under state law and are subject to examination by the FDIC, and to “prompt corrective action” and capital guarantee requirements if the banks they control encounter financial difficulties. In some instances, they are subject to firewalls and corporate governance restrictions that exceed those applicable to bank holding companies. These tools, in the words of Chairman Donald Powell, allow the FDIC to manage the relationships between industrial loan banks and their owners “with little or no risk to the deposit insurance funds – and no subsidy transferred to the nonbank parent.”[2]