General Motors has announced that it’s withdrawing its application from the Federal Deposit Insurance Corporation (FDIC) to create GM Financial Bank after more than three years of processing.
The General applied to charter an Industrial Loan Company – otherwise known as an Industrial Bank – back in late 2020. However, after three years of working with the FDIC, the Detroit-based automaker pulled out its application, according to a report from Automotive News. GM reportedly has plans to refile its application sometime in the future.
It’s worth noting that General Motors gave no explanation as to why it withdrew the application.
The hope behind forming GM Financial Bank was to offer niche lending services to its customers. Furthermore, an Industrial Bank is similar to a State Bank, except that it is backed by a business instead of a bank holding company. As such, with an Industrial Loan Company charter, non-banks can originate loans and collect insured deposits, meaning an automaker like GM can efficiently and cost-effectively provide financial services because it doesn’t need to follow each individual state’s regulations.
Interestingly, other major automakers have established Industrial Banks, albeit outside of the United States. In addition, crosstown-rival Ford also has an application pending with the FDIC to create Ford Credit Bank.
For reference, the FDIC has only approved three Industrial Bank applications since 2020, with some folks in the bank industry opposing such arrangements due to the lack of supervision by the Federal Reserve. In regard to GM Financial specifically, GM’s captive finance arm applied to charter its bank in Utah, and had planned to use the bank for auto lending and deposits. The hope was that the bank would create more stable funding and expand financing options to General Motors’ customers.
“GM Financial remains confident in the viability of our bank application,” GM Financial CEO Dan Berce remarked back in June 2024.
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