WASHINGTON/NEW YORK (Reuters) - Wal-Mart Stores Inc. said on Friday it has withdrawn its request to open a specialty bank after immense opposition from politicians, consumer groups and community banks hampered its application with U.S. bank regulators.
Wal-Mart said its application had been surrounded by “manufactured controversy” since it was submitted almost two years ago, and it was walking away to focus instead on introducing new financial services in its stores.
“We have a lot of things that will be coming out this year that we think, one, could have gotten lost in all this controversy, and two, are a lot bigger idea than having a bank,” said Wal-Mart Financial Services President Jane Thompson in an interview.
She declined to elaborate on what those services would include.
Wal-Mart submitted an application to regulators in 2005 to allow it to operate a specialty bank known as an industrial loan company (ILC).
The retailer repeatedly insisted that it was not interested in branch banking, but was looking to use the bank to save money by internalizing credit-card and check transactions.
But consumer groups and banks feared Wal-Mart would eventually provide other retail banking services, leading to the demise of community banks.
“Wal-Mart made a wise choice,” U.S. Federal Deposit Insurance Corp. Chairman Sheila Bair said in a statement. “This decision will remove the controversy surrounding their intentions.”
Bair added: “They don’t need an ILC to play an important role in expanding access to financial services by partnering with banks and others.”
Wal-Mart’s decision comes one day after a U.S. lawmaker released an e-mail that he said indicated the company’s interest in consumer banking extended beyond what it had disclosed to banking regulators.
“I’m glad they withdrew their application but there is still a very real need to separate banking and commerce,” said Ohio Republican Rep. Paul Gillmor, co-sponsor of legislation to curb commercial ownership of ILCs.
While Wal-Mart has pulled its application, Home Depot Inc. said it remains committed to its application pending before U.S. regulators to acquire an existing bank.
The home improvement retailer said its application to acquire EnerBank USA from CMS Energy Corp. “in no way” is affected by Wal-Mart’s decision.
Earlier this year, the FDIC extended a freeze on applications by commercial companies to open or acquire ILCs, and the U.S. House Financial Services Committee is holding a March 22 hearing on the issue.
A U.S. House bill, which is widely expected to be approved by the full House, would also expand the FDIC’s powers, but Utah’s Robert Bennett, an influential senior Republican on the Senate Banking Committee, backs commercial firms owning ILCs.
Many ILCs — which can offer a range of products including checking and savings accounts, credit cards, real estate lending and other financing — are chartered in Utah.
Floyd Stoner, an executive director at the American Bankers Association trade group, said Wal-Mart could always reapply. “I don’t think this changes anything,” he said.
The American Financial Services Association, a trade group for industrial banks, repeated its call for the FDIC to lift the moratorium and resume reviewing all applications.
Wal-Mart already offers a number of financial services in its stores, like a credit card in partnership with General Electric and money transfers through MoneyGram.
Wal-Mart’s Thompson said the retailer had no plans to file an ILC application in the future and instead was looking for partners to work with to develop new services.
“We continue to look for partners who have banks or maybe don’t have banks,” she said. “A lot of products that we are looking at to grow don’t need a bank.”
The Independent Community Bankers of America trade group cheered Wal-Mart’s decision. “Congress now needs to act quickly to address other pending commercial ILC applications,” ICBA President Camden Fine said.
Wal-Mart shares rose 14 cents to $46.14 in afternoon trading on the New York Stock Exchange. Home Depot shares were unchanged at $37.49.