The Federal Deposit Insurance Corp. Approves Ford and GM Industrial Loan Companies
Ford Motor Co. and General Motors Co. received approval for deposit insurance applications from the Federal Deposit Insurance Corp. This milestone allows the automakers to establish their own industrial banks.
Focus on Auto Lending
Ford Credit Bank and GM Financial Bank, chartered in Utah, will focus on auto lending. Ford will lend through indirect retail installment and lease contracts, while GM will fund retail installment contracts through GM Financial.
Funding for Ford Credit Bank will primarily come from retail savings accounts and time deposits obtained via the bank’s website and mobile app. On the other hand, GM Financial Bank’s funding will mainly come from savings accounts and time deposits via the bank’s website and mobile app.
Both automakers are required to establish their banks within 12 months and maintain a minimum 15% tier 1 leverage ratio.
Long-term Strategic Initiative
Ford Credit CEO and President, Cathy O’Callaghan, stated that the approval marks a long-term strategic initiative to expand capabilities and offer additional savings options to customers. This move is expected to lower the cost of funding and broaden financing offerings over time.
Challenges Faced
Ford’s ILC charter faced challenges, with initial application submission in 2022 amidst pushback from trade groups. Similarly, GM Financial’s process was prolonged, with conditional approval gained in 2024 and subsequent withdrawal and reapplication before final approval in February 2025.
Concerns and Responses
Bank trade groups such as the Independent Community Bankers of America have expressed concerns regarding ILCs due to perceived regulatory loopholes. ICBA President and CEO, Rebeca Romero Rainey, emphasized the potential systemic risks associated with such charters.
Despite concerns, the FDIC has granted ILC charters to few entities in recent years, with Thrivent Financial for Lutherans being one of the recipients in 2024.
Future Prospects
Several companies, including Nissan, PayPal, and Affirm, are awaiting decisions on their ILC applications from the FDIC. These approvals are seen as encouraging by regulatory consultancy experts, enabling companies to offer financial services and broaden consumer options.
Valerie Song, senior director at Klaros Group, praised the FDIC’s commitment to maintaining high standards for safety and soundness in approving ILC charters.
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