The FDIC is seeking comment on proposed changes to its regulation governing parent companies of industrial banks and industrial loan companies—Part 354 of the FDIC Rules and Regulations.

“The proposed amendments would revise part 354 to clarify and enhance the agency’s framework to supervise industrial banks, mitigate risks to the Deposit Insurance Fund, and provide necessary transparency for market participants,” the agency said, in outlining the proposed rule.

The proposed rule would establish additional criteria the agency would consider in assessing the risks facing an industrial bank by its parent organization and evaluating the industrial bank’s ability to function independently from the parent organization.

That assessment would include the ability of the bank to meet the needs of the communities in which it does business.

In addition, the proposed amendments revise the scope of the existing rule to by:

• Including within the scope of Part 354companies that would own an industrial bank as a result of a conversion of a federal savings bank to a state-chartered industrial bank or other transactions as determined by the FDIC;
• Expanding the reach of Part 354 to situations where there is a change of control at a level above the parent company of an industrial bank or a merger in which the parent company is the entity that remains; and
• Providing the FDIC the regulatory authority to apply part 354 to other situations where an industrial bank would become a subsidiary of a company that is not subject to Federal consolidated supervision.

Although the transactions to which the proposed amendments would apply are likely to be seen infrequently, the proposed amendments demonstrate the increased focus of the FDIC on industrial bank parent companies.  Whether the proposed amendments would enable the formation of more industrial banks remains to be seen.

Public comments on the proposal are due 60 days after publication in the Federal Register.

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