Bill Overview
Title: Close the Shadow Banking Loophole Act
Description: This bill (1) provides for the federal regulation and supervision of industrial banks, also known as industrial loan companies (ILCs), and their parent companies; and (2) sets forth a deadline for the consideration of pending ILC Federal Deposit Insurance Corporation (FDIC) deposit insurance applications. ILCs are state chartered institutions owned by nonfinancial businesses (parent companies) that provide several services similar to banks, such as originating loans and processing payments. The parent companies are not subject to supervision by the Federal Reserve Board. Under current law, the Federal Deposit Insurance Corporation (FDIC) may grant deposit insurance to these institutions.
Sponsors: Sen. Brown, Sherrod [D-OH]
Target Audience
Population: People employed by or relying on industrial banks and their parent companies worldwide
Estimated Size: 180000
- Industrial banks (ILCs) are state-chartered and can be owned by nonfinancial businesses.
- The regulation will affect ILCs since they will now be subject to federal regulation and supervision.
- The employees, customers, and management of ILCs will be directly impacted by changes in operational compliance.
- Nonfinancial businesses that own these banks, as parent companies, will be impacted due to more stringent oversight.
- Customers who are clients of these ILCs will be indirectly impacted by changes in the regulatory environment.
Reasoning
- The population most affected by the policy includes employees of ILCs, their parent companies, and customers relying on ILC services.
- Approximately 25 ILCs operate across the U.S., and various customers rely on their services. Hence, the individuals working in or interacting with these institutions will experience the most significant impact.
- The policy targets around 180,000 individuals potentially impacted within the U.S., who are assessed within a $25 million budget for the first year, which implies moderate to intensive changes could be expected.
Simulated Interviews
Senior Compliance Officer at Industrial Bank (Salt Lake City, UT)
Age: 45 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 10/20
Statement of Opinion:
- The enhanced regulation will increase our workload, but it's necessary to level the playing field with traditional banks.
- There will be challenges initially, but long-term stability is a benefit.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 9 | 6 |
| Year 20 | 9 | 6 |
Tech Entrepreneur (Phoenix, AZ)
Age: 30 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 15/20
Statement of Opinion:
- We might face increased fees or stricter credit requirements if ILCs are regulated like traditional banks.
- I'm concerned about potential disruptions to the services we use daily.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 6 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
General Manager at Parent Company of ILC (San Diego, CA)
Age: 52 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 15.0 years
Commonness: 5/20
Statement of Opinion:
- Our operational costs will rise, and we will need to hire more compliance staff.
- This decision adds administrative overhead, but it aligns us with other financial institutions.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 8 | 5 |
| Year 20 | 8 | 5 |
Customer using ILC for personal loans (New York, NY)
Age: 28 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 15/20
Statement of Opinion:
- I'm worried that access to loans could become less flexible and more costly due to new regulations.
- I hope the changes won't affect the beneficial loan terms currently offered.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 8 |
| Year 2 | 7 | 8 |
| Year 3 | 7 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Small Business Owner (Seattle, WA)
Age: 40 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 18/20
Statement of Opinion:
- Our ability to process payments efficiently is crucial, and I worry about disruptions or increased costs.
- Regulation might bring stability, but at what cost to small business operations?
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 6 |
Retired (Chicago, IL)
Age: 60 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 3.0 years
Commonness: 20/20
Statement of Opinion:
- I hope the regulation doesn't interrupt my pension payments or impose new fees.
- It's complex, and I rely on the stability promised by regulated institutions.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Data Analyst at ILC (Austin, TX)
Age: 34 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- The changes will offer more transparency and uniform standards, possibly enhancing trust in our institution.
- I anticipate a learning curve as we adapt our processes to meet the new demands.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 9 | 7 |
Student (Miami, FL)
Age: 20 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 14/20
Statement of Opinion:
- I benefit from the current terms offered by my ILC and fear changes could complicate my financial planning.
- Regulations may improve protections, but I’m skeptical about increased costs.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 6 | 7 |
| Year 5 | 6 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Corporate Lawyer at Parent Company (Los Angeles, CA)
Age: 47 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 20.0 years
Commonness: 5/20
Statement of Opinion:
- Increased federal oversight means more stringent compliance checks—it's a double-edged sword.
- This move could mean more job security as compliance needs increase.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 8 | 5 |
Loan Officer at Industrial Bank (Dallas, TX)
Age: 38 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 12/20
Statement of Opinion:
- How we assess and approve loans will definitely change, possibly making my role more complex.
- Clients may need more information or assistance to navigate new policies.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 8 | 6 |
Cost Estimates
Year 1: $25000000 (Low: $20000000, High: $30000000)
Year 2: $26000000 (Low: $21000000, High: $31000000)
Year 3: $27000000 (Low: $22000000, High: $32000000)
Year 5: $29000000 (Low: $24000000, High: $34000000)
Year 10: $32000000 (Low: $27000000, High: $37000000)
Year 100: $50000000 (Low: $45000000, High: $55000000)
Key Considerations
- The policy introduces federal regulation and supervision for entities previously exempt, impacting operational costs.
- The timeline for the consideration of pending FDIC applications might transition companies rapidly to comply, affecting readiness and business strategy.
- This may standardize how industrial banks are overseen, leading to potential benefits over the longer-term stability in the sector.