Edward Jones gives up on opening an industrial bank

Financial advisory firm Edward Jones has abandoned efforts to open a Utah-based industrial bank following recent talks with the Federal Deposit Insurance Corp.

The St. Louis-based parent company of Edward Jones last week withdrew its filings with the FDIC and the Utah Department of Financial Institutions, according to an Oct. 7 securities filing. In explaining the decision, the company cited both its conversations with the FDIC and what it called “the current environment.”

Since last year, when Democrats won a majority on the FDIC board, industry observers viewed the agency as unwelcoming efforts to open new industrial banks, also known as industrial loan companies or ILCs.

Edward Jones, who submitted industrial banking applications to regulators more than two years ago, initially said he believed the bank could begin operations in late 2021.

Adobe Stock

Edward Jones submitted his demands to federal and state regulators more than two years ago. The company’s plan was to open Edward Jones Bank, which would have been headed by Ray Dardano, former CEO of Marlin Business Bank. The company initially said it believed the bank could begin operations in late 2021.

“An affiliate bank would allow us to expand our offerings for retail investors, while supporting our approach of helping Edward Jones branch teams make our 7 million customers feel understood, informed, safe. and in control,” said Ken Cella, principal at Edward Jones. , said in a July 2020 press release.

In his securities filing last week, Edward Jones said he was looking at other potential ways to offer banking products to his customers. The company said it “actively pursues additional strategies, products, structures, and relationships to meet customers’ saving, spending, and borrowing needs and to help customers realize financially what’s most important.” important to them”.

Industrial bank charters have long drawn opposition from community banks and consumer advocates – both because they allow non-financial businesses to enter the banking system and because they are not supervised by the Federal Reserve.

Under the Trump administration, FDIC approved industrial banking apps from payment company Square (now Block) and student loan service Nelnet. But between 2011 and 2018, no new industrial banks opened their doors.

The FDIC was led during those years by Martin Gruenberg, who again became acting president of the agency in February 2022. In 2020, when Gruenberg was a member of the FDIC’s board of directors, he opposed the request for Square to open an industrial bank.

Companies that currently have pending industrial banking applications include Japanese e-commerce company Rakuten, General Motors Financial and Ford Motor Credit. Ford applied for to Utah regulators in July.

Earlier this year, GreatAmerica Financial Services dropped plans to open an industrial bank.