Auto Giants Shift Gears: Ford and GM Enter Banking

The FDIC has approved deposit insurance applications from Ford and GM, enabling them to set up industrial banks. Although traditional banks have raised concerns about these industrial loan charters, proponents argue they allow companies to offer limited financial services, marking a significant move for the auto industry.

The Federal Deposit Insurance Corporation (FDIC) has given the green light to Ford Motor Company and General Motors Company to establish industrial banks by approving their deposit insurance applications. This landmark decision allows these automotive giants to add financial services to their portfolios.

The conditional approvals demand that both companies establish their lending arms within a year. This development is part of an ongoing debate between commercial firms and the banking sector over 'industrial loan charters.' Traditional banks have expressed concerns, suggesting these charters enable commercial companies to engage in banking activities without adequate oversight.

Supporters of industrial loan charters argue that they permit companies like Ford and GM to offer financial services to customers in a controlled manner. This move could potentially reshape the landscape for both the auto and financial industries.

(With inputs from agencies.)