BENTONVILLE, Ark. — Dealt a major regulatory setback in its bid to charter an industrial loan bank, Wal-Mart Stores Inc., insisted last week its application for deposit insurance remains unchanged adding, however, that its working relationship with credit unions remains positive.
"There is no change in our position," said John Kelly, director of financial services, in response to a new strategy the giant retailer might pursue following the Jan. 31 extension of a one-year ILC moratorium by the Federal Deposit Insurance Corp.
It was noted that Wal-Mart now has plenty of time to plot its next move while Congress deliberates the thorny ILC issue of joining commerce and banking. Still, half a dozen states have now adopted or are moving toward anti-ILC laws barring commercial firms from owning banks.
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Credit unions have long been on the sidelines while banks campaigned hard to extend the FDIC moratorium.
However, CUs have continued to add Wal-Mart branches under leasing deals, many set up through a third-party, Financial Supermarkets Inc. of Cornelia, Ga., with the latest being L&N Federal Credit Union of Louisville, Ky. The Kentucky CU said it expects to open its first retailer branch this spring or early summer in the Middletown area of Louisville with a second city facility in 2008.
Kelly of Wal-Mart said that out of 300 financial institutions with in-store branches, about 30 are credit unions "and we see no change in the proportion of credit unions opening branches in the future."
There are 1,200 actual facilities with the same 10%, or 120 CU sites.
The FDIC extension of the moratorium impacting Wal-Mart, Home Depot and other firms came as Rep. Barney Frank (D-Mass.) and Paul Gillmor (R-Ohio) introduced a bill broadly backed by the banking lobby in the House on Jan. 29, which would bar a company from owning an ILC unless 85% of its business is already in financial services. The Frank/Gillmor bill had been first introduced in the closing days of Congress last year.
The FDIC said it has taken on no new applications since July 2006 and the 14 it had on file have dwindled since to 10. Among the dropouts was one from Wescom Credit Union of Pasadena, Calif. that planned to charter an ILC to buy card portfolios.
On CU in-store branches, Kelly said decisions are made by the retailer's leasing department and "are based on which bank or credit union is predominant" in a given market. For example, SunTrust Bank is central to the Florida market and The Woodlands Bank of Dallas is a major Texas player, he said.
"There are a lot of factors that go into such decisions," he said and they are based "on what kind of presence the financial institution has."
"I know some credit unions have a strong presence on military bases," he said suggesting that was a criterion. –[email protected]
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