Edward Jones abandons plan to open industrial bank

The financial advisory firm Edward Jones has abandoned its effort to open a Utah-based industrial bank following recent discussions with the Federal Deposit Insurance Corp.

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

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

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Edward Jones submitted its applications to federal and state regulators more than two years ago. The company's plan was to open Edward Jones Bank, which would have been led by Ray Dardano, previously the CEO of Marlin Business Bank. The firm initially said that it believed the bank could begin operations in late 2021.

"An affiliated bank would enable us to broaden our offerings for retail investors, while also supporting our approach to helping Edward Jones branch teams ensure our 7 million clients feel understood, informed, secure and in control," Ken Cella, a principal with Edward Jones, said in a July 2020 press release.

In its securities filing last week, Edward Jones indicated that it is looking for other potential ways to offer banking products to its customers. The firm said that it is "actively pursuing additional strategies, products, structures and relationships to meet clients' saving, spending and borrowing needs and help clients achieve financially what is most important to them."

Industrial bank charters have long drawn opposition from community banks and consumer advocates — both because they allow a way for nonfinancial companies to enter the banking system, and because they are not supervised by the Federal Reserve.

During the Trump administration, the FDIC approved industrial bank applications from the payments firm Square (now Block) and the student-loan servicer Nelnet. But between 2011 and 2018, no new industrial banks opened.

Democratic majority on FDIC board spells trouble for ILC hopefuls

The FDIC was led during those years by Martin Gruenberg, who again became the agency's acting chair in February 2022. Back in 2020, when Gruenberg was serving as an FDIC board member, he opposed Square's application to open an industrial bank.

Companies that currently have pending industrial bank applications include the Japanese e-commerce firm Rakuten, General Motors Financial and Ford Motor Credit. Ford submitted its application to Utah regulators in July.

Earlier this year, GreatAmerica Financial Services discarded its plan to open an industrial bank.