WASHINGTON (Reuters) - San Francisco-based payments processor Square Inc. said on Thursday it had withdrawn its regulatory application to open a deposit-taking bank, but that the company plans to refile its paperwork at a later date.
The fintech firm last year applied with the Federal Deposit Insurance Corp (FDIC) for a special “industrial loan company (ILC)” licence that, if granted, allows nontraditional financial firms to collect government-insured deposits.
“We have been engaged in constructive dialogue with the FDIC, and our decision to withdraw and refile was a procedural step in the review process that will allow us to amend and strengthen some areas of our FDIC insurance application,” a Square representative said in an emailed statement.
The company said its separate ILC charter application with the State of Utah Department of Financial Institutions remains active.
“We continue to work closely with the FDIC and Utah DFI on our applications,” the representative said.
The company did not provide an anticipated time frame for reapplying with the FDIC.
Square’s decision was first reported by trade journal American Banker.
Fintech firms are closely watching to see if Jelena McWilliams, a former banker who took over the FDIC last month, will end the regulator’s informal moratorium on issuing ILC licenses - one of the few ways nonbank companies can move into deposit-taking.
During her Senate confirmation hearing in January, McWilliams said she would address the holdup on the issuance of such licenses and would grant them if the applications met the FDIC’s standards.
The issuance of ILCs to the likes of car manufactures and supermarkets has long been a controversial issue. The powerful small bank lobby has strongly opposed ILCs, which they say allows nonbanks to circumvent tough bank rules
The Independent Community Bankers of America trade group had publicly opposed Square’s application, saying fintech firms should be subject to the same restrictions and supervision as traditional banks.
Reporting by Michelle Price; editing by Jonathan Oatis