Support for closing banking law exemption

A bipartisan bill that aims to close a gap in federal banking law received support from America’s Credit Unions and other financial services trade groups. The Close the Shadow Banking Loophole Act would restore long-standing safeguards that separate banking from commercial activity. 

Introduced by Sens. John Kennedy, R-La., and Andy Kim, D-N.J., the bill would eliminate the industrial loan company (ILC) exemption, which allows commercial firms and other nonbanks to own a Federal Deposit Insurance Corporation-insured institution without being subject to consolidated Federal Reserve supervision.  

Writing directly to the bill sponsors to offer support, the coalition highlighted how this loophole results in uneven oversight and potential risks to consumers and the broader financial system. 

“The loophole violates the longstanding U.S. policy that banking and commerce should remain separate, and we commend Congressional efforts to maintain this separation,” the letter states.