Square to make another bid for bank charter
WASHINGTON — Square plans to revive its bid to charter an industrial loan company after withdrawing a previous application earlier this year, the payments processor confirmed Wednesday.
A spokesperson for the fintech leader said it planned to refile its application with the Federal Deposit Insurance Corp. by the end of the day. The San Francisco company had pulled its earlier bid over the summer to bolster parts of its plan, including naming additional executive officers and providing details about the proposed bank's Salt Lake City headquarters. Square will also amend its application with the Utah Department of Financial Institutions.
“Square Capital is uniquely positioned to build a bridge between the financial system and the underserved, creating access for small businesses to both capital and the economy,” said Square capital lead, Jacqueline Reses, in an emailed statement. “We will continue to work closely with the FDIC and Utah DFI as they review our applications for Square Financial Services.”
Among the additional officers the company plans to name as managers of the new financial institution is former Green Dot executive Brandon Soto, who will serve as the chief financial officer.
Square's plans to refile its application were reported earlier Wednesday by The Wall Street Journal.
Several fintech companies have also withdrawn recent ILC applications from the FDIC, including student loan servicer Nelnet and Social Finance. The FDIC has not approved an ILC since 2008 partly due to controversy around the charter itself. Critics, including community bankers, argue the charter blurs the line between commerce and banking. An ILC charter allows a company to accept insured deposits without having to follow Bank Holding Company Act requirements, and can be owned by nonfinancial parents.
Yet many observers believe new FDIC Chairman Jelena McWilliams will eventually approve ILC charters based on recent comments made about the need for more startup banks overall.
“I am encouraged by innovative firms with novel ideas for expanding access to banking services and making banking more efficient and customer-friendly,” wrote McWilliams in an op-ed earlier this month in which she announced a request for comment on the FDIC’s entire de novo application process.
“As with any other filings, these firms must meet all applicable statutory factors, as well as our standards for safety and soundness, in order to be approved for deposit insurance,” she added.