The American Bankers Association has hit out at plans by Japanese e-commerce giant Rakuten to apply for a banking charter in the US.
Rakuten, known as the Amazon of Japan, has resolved to establish an industrial bank in the State of Utah.
The new entity is set to be formally founded on July 31, 2019. It will be named Rakuten Bank America and its business activities will include credit card issuing and acquiring, personal loans, business loans and deposits. The initial capital will be $400 million.
Rakuten is following in the footsteps of Square (which refiled its application for a licence in December) by bidding to enter the banking space via an ILC charter, sidestepping more rigorouse bank holding company requirements while guaranteeing FDIC insurance on deposits.
The American bankers Association has expressed serious concerns about the implications of a large technology company obtaining a banking charter.
“As Japan’s largest e-commerce site, Rakuten is a major technology firm engaged primarily in non-financial activities,” says ABA president and CEO Rob Nichols. “Allowing Rakuten to participate in banking activities would raise important questions about the free flow of credit, consumer privacy and possible conflicts of interest— questions not raised by current ILC charter holders.”
Nichols has called on the FDIC “to rigorously review every aspect of the application to see if it meets the relevant requirements for this charter, including community need, keeping in mind the broad commercial rather than financial nature of Rakuten’s business and the significant questions that raises”.
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