Wal-Mart Bank Proposal Ripped By Bankers
NEW YORK -- A proposal by retail giant Wal-Mart Stores Inc. to open an industrial bank in Utah is opposed by community bankers around the country who are lobbying the Federal Deposit Insurance Corporation against the idea, The New York Times reported.
A coalition was formed to keep Wal-Mart out of banking, with members include the Independent Community Bankers of America, The National Grocers Association, the National Association of Convenience Stores (NACS), and the United Food and Commercial Workers union, which is attempting to unionize Wal-Mart workers.
In July, Wal-Mart filed an application with the FDIC to open a Utah bank to process credit and debit applications for its 3,500 U.S. stores. The move was aimed at saving the retailer from having to pay national banks for processing work.
A public comment period for the FDIC application, which ended on Sept. 23, produced an unprecedented 1,100 letters. Generally, the FDIC receives no more than six written comments on applications, the Times reported.
Jeff Lenard, a spokesman for NACS, provided CSNews Online with excerpts from an official letter sent to FDIC regarding Wal-Mart’s application.
The letter stated, "As an industrial bank, Wal-Mart could establish banks in its retail stores, causing competitive problems for local bankers in much the same way that it has for local retailers. This would leave Wal-Mart as the only banking option in many small communities and force small businesses to hand their deposits over to, and apply for loans from, their biggest competitor. Further, as an industrial bank, Wal-Mart would not be subject to the consolidated supervision and many of the restrictions applicable to other owners of insured banks. This could make it impossible to detect financial troubles before they have an opportunity to affect the federal insurance safety net."
The letter also stated that Wal-Mart failed to meet the criteria that the FDIC must consider in reviewing insurance applications under Section 6 of the Federal Deposit Insurance Act.
Some of the bankers fear that Wal-Mart eventually would open retail bank branches, but Janet Thompson, president of Wal-Mart Financial Services, told the Times that was not the intention.
U.S. Congressmen Paul Gilmor of Ohio and Barney Frank of Massachusetts have asked the FDIC to hold hearings on the matter.
An FDIC ruling on the application is expected by July 2006, the Times reported.
A coalition was formed to keep Wal-Mart out of banking, with members include the Independent Community Bankers of America, The National Grocers Association, the National Association of Convenience Stores (NACS), and the United Food and Commercial Workers union, which is attempting to unionize Wal-Mart workers.
In July, Wal-Mart filed an application with the FDIC to open a Utah bank to process credit and debit applications for its 3,500 U.S. stores. The move was aimed at saving the retailer from having to pay national banks for processing work.
A public comment period for the FDIC application, which ended on Sept. 23, produced an unprecedented 1,100 letters. Generally, the FDIC receives no more than six written comments on applications, the Times reported.
Jeff Lenard, a spokesman for NACS, provided CSNews Online with excerpts from an official letter sent to FDIC regarding Wal-Mart’s application.
The letter stated, "As an industrial bank, Wal-Mart could establish banks in its retail stores, causing competitive problems for local bankers in much the same way that it has for local retailers. This would leave Wal-Mart as the only banking option in many small communities and force small businesses to hand their deposits over to, and apply for loans from, their biggest competitor. Further, as an industrial bank, Wal-Mart would not be subject to the consolidated supervision and many of the restrictions applicable to other owners of insured banks. This could make it impossible to detect financial troubles before they have an opportunity to affect the federal insurance safety net."
The letter also stated that Wal-Mart failed to meet the criteria that the FDIC must consider in reviewing insurance applications under Section 6 of the Federal Deposit Insurance Act.
Some of the bankers fear that Wal-Mart eventually would open retail bank branches, but Janet Thompson, president of Wal-Mart Financial Services, told the Times that was not the intention.
U.S. Congressmen Paul Gilmor of Ohio and Barney Frank of Massachusetts have asked the FDIC to hold hearings on the matter.
An FDIC ruling on the application is expected by July 2006, the Times reported.