ILCs are state chartered companies with broad banking powers that can operate with federal deposit insurance. Currently, there are 56 FDIC-insured ILCs, mostly headquartered in Utah and California. Five other states—Colorado, Minnesota, Indiana, Hawaii and Nevada—permit these charters. In existence since the early 1900's, ILCs are regulated by the chartering state regulator and by the FDIC. ILCs are not subject to the Bank Holding Company Act (BHCA) and Federal Reserve supervision, permitting a variety of financial and nonfinancial ILCs owners.

Legislative attention has focused on the ILC during this Congress in the context of:

H.R. 758 - Business Checking Freedom Act - H.R. 758 passed the House on April 1, 2003. It would allow all banks to pay interest on business checking accounts. Payment of interest on business checking accounts has been prohibited since the 1930s. H.R. 758 allows NOW accounts for business - essentially allowing the equivalent of business checking accounts without subjecting ILCs to the BCHA.

H.R. 1375 - The Financial Services Regulatory Relief Act - H.R. 1375 passed the House on March 18, 2004. Section 401 of this bill is a federal override of state law that grants de novo interstate branching authority to all banks (including ILCs) in states that have not opted into unlimited interstate branching. While this power is granted to all banks, ILCs critics are concerned about parity and competitive issues inasmuch as ILCs can have commercial ownership and conduct virtually the same business as banks (especially if H.R. 758 is enacted) without having the ILCs' parent companies supervised by the Federal Reserve.

FDIC's supervisory experience with ILCs suggests that ILCs charters pose no greater safety and soundness risk than do other charter types. As with any other insured institution, ILCs are subject to examinations and other supervisory activities. The risk posed by any insured depository institution depends on its business plan and management's competency in implementing risk management programs. The FDIC and state chartering authorities directly supervise insured ILCs, which must comply with the FDIC's Rules and Regulations, including but not limited to, requirements for capital standards, safe and sound operations and consumer compliance and community reinvestment. ILCs are also subject to Sections 23A and 23B of the Federal Reserve Act limitations on insured institution transactions with affiliates. ILCs are also subject to Federal Reserve Reg O that governs credit to insiders and their related interests.

The Senate has not scheduled action on either House-passed bill, due in part to opposition to expanding ILCs' authority.