Payments processor Square has temporarily suspended its application to the Federal Deposit Insurance Corporation (FDIC) for a special purpose banking licence.
Square submitted its application to become a deposit-taking bank via an Industrial Loan Company (ILC) license in September last year. Industrial loan charters give companies permission to carry out banking services but also enables them to continue providing other non-financial commercial services – a practice that is denied to fully-licensed banks.
Square’s attempt to open a back door to the banking industry was fiercely opposed by the Independent Community Bankers of America (ICBA), which protested to the FDIC that the company’s application was designed to avoid legal prohibitions and restrictions under the Bank Holding Company Act.
The decision to withdraw from the process – first noted by American Banker – marks only a temporary cessation of hostilities, as the firm says it will re-file the paperwork in due course.
In a statement to Reuters, Square says: “We have been engaged in constructive dialogue with the FDIC, and our decision to withdraw and refile was a procedural step in the review process that will allow us to amend and strengthen some areas of our FDIC insurance application.”