WASHINGTON - The National Grocers Association has joined critics of Wal-Mart Stores' plans to launch a banking operation.
saying that loopholes in federal policy could allow the retailer to engage in interstate banking without being subject to the same supervision and restrictions as other banks.
Bentonville, Ark.-based Wal-Mart has applied to open a type of bank known as an industrial loan company to process its own credit and debit transactions. However, opponents fear the retailer could easily extend its ILC into retail banking in at least 22 states through regulatory loopholes. These banks could be free of Federal Reserve Board regulation, and subsequently endanger FDIC insurance and pose competitive problems for NGA member companies and consumers, NGA argued.
NGA said it supports federal legislation that would close loopholes so that companies that establish ILCs cannot engage in interstate branch banking. "This application raises important public policy questions and serves to focus the growing debate on the proper scope of industrial loan companies," Thomas F. Wenning, senior vice president and general counsel for the NGA, said in a statement.
NGA has joined the National Association of Convenience Stores, the Independent Community Bankers of America and the United Food and Commercial Workers union in the Sound Banking Coalition. Wenning is scheduled to address the issue at FDIC hearings scheduled in Arlington, Va., on April 10. In FDIC hearings set for April 25 in Kansas City, Mo., Gary Phillips, president and chief executive officer of Associated Wholesale Grocers and a past NGA chairman, will testify, NGA said.
Wal-Mart last week reportedly made revisions in its application to address some of the criticisms of its banking plan. The revisions included a proposal to boost its management with the appointment of a chief risk officer and withdrawing a request for an exemption to federal law requiring banks to help meet credit needs of low- and moderate-income households.