Joint Trades Letter to FDIC on Rakuten Re-Submitted Deposit Insurance Application

The Hon. Jelena McWilliams
Chairman
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429

Dear Chairman McWilliams:

The undersigned organizations are responding to the recent re-submission by Rakuten Card Co., Ltd., a subsidiary of Rakuten, Inc., of an application for federal deposit insurance (Rakuten Application) with the Federal Deposit Insurance Corporation (FDIC) to insure the deposits of Rakuten Bank America (Rakuten Bank). We believe that the revised application has not materially changed and does little to address the fundamental question of mixing banking and non-financial activity as raised by the initial application, including concerns involving the use, privacy, and security of customer information. Therefore, we are re-submitting our previous comment letters, which continue to be applicable to the current application. Because of this and for the reasons described below, the FDIC should neither review nor approve the Rakuten Application.

We refer to and support the attached letter, dated August 30, 2019 to the FDIC from the American Bankers Association (ABA) and the Bank Policy Institute (BPI), that set forth the reasons for denying the 2019 Rakuten Application, including (i) significant risks to the Deposit Insurance Fund (DIF) raised by the affiliation, integration, and assimilation of banking and non-financial businesses, and (ii) consumer protection concerns raised by the collection, use, privacy, security, and safeguarding of customer information. We refer further to and support the attached ABA letter to the FDIC, dated February 26, 2020, which cites the FDIC’s expressed concern about proposed institutions – which we believe would include Rakuten Bank – that do not present a viable business model on a standalone basis. Consequently, review and approval of the Rakuten Application would run counter to the FDIC’s responsibilities to protect the DIF and to ensure that the convenience and needs of the community to be served are met.

In connection with a nonfinancial company’s intention to establish a new bank, the FDIC itself recently has acknowledged the “complicated policy trade-offs” involving “the mixing of banking and commerce, and the ability of banks to affiliate with nonfinancial firms.” The FDIC concluded that these trade-offs “are best addressed by Congress.” We agree with the FDIC that the Rakuten Application’s precedent-setting nature warrants deferral to Congress. Therefore, unless and until there is federal legislation that specifically addresses this issue, the FDIC should shelve, or alternatively, disapprove the Rakuten Application. At a minimum, the FDIC should not commence review of the Rakuten Application for federal deposit insurance until the agency finalizes its pending rulemaking on parent companies of ILCs and industrial bank subsidiaries. Finally, if the FDIC is not inclined to await federal legislation, then we encourage the agency to conduct a public hearing prior to its review of the Rakuten Application.

Thank you for your consideration. If you have any questions or wish to discuss, please do not hesitate to contact any of the organizations below.

Very truly yours,

Timothy Keehan
Vice President & Senior Counsel
American Bankers Association

Dafina Stewart
Senior Vice President & Associate General Counsel
Bank Policy Institute

Jenna Burke
Vice President & Associate General Counsel
Consumer Bankers Association

Past Letters

• Letter to FDIC Chair re: Rakuten Application, February 26, 2020
• ABA-BPI Joint Comment Letter Opposing Rakuten ILC Application, August 30, 2019