Ford, GM win FDIC approval for industrial banks
Regulatory clearance enables automakers to lower financing costs through deposit-taking units
Ford Motor Company and General Motors secured federal approval on Thursday to establish industrial banks, a move that will allow both automakers to reduce financing costs and expand their financial services operations.
The Federal Deposit Insurance Corporation approved deposit insurance applications for Ford Credit Bank and GM Financial Bank, both to be chartered in Utah. The regulatory clearance follows years of applications and marks a significant expansion of the automakers' financial services capabilities.
Ford shares rose 0.2 percent to $13.80 in Thursday trading, while GM gained 1 percent to $81.70, reflecting modest investor optimism about the strategic benefits of the new banking ventures.
The approvals represent a victory for both companies after lengthy regulatory processes. Ford first submitted its application in 2022, while GM initially filed in December 2020, withdrew its application in June 2024 to address FDIC feedback, and resubmitted in January 2025.
Industrial banks, also known as industrial loan companies, offer a unique regulatory advantage: they can accept FDIC-insured deposits and make loans, but their commercial parent companies are not subject to consolidated supervision by the Federal Reserve. This structure has attracted non-financial companies seeking to integrate banking services with their core businesses.
Both Ford Credit Bank and GM Financial Bank will primarily fund their auto lending operations through retail savings accounts and time deposits offered via websites and mobile applications. The banks will focus on purchasing retail installment sales contracts from dealerships, maintaining their traditional auto financing business while gaining access to more stable, lower-cost funding sources.
The FDIC imposed several conditions on the approvals, including requirements that both banks maintain a minimum 15 percent Tier 1 leverage ratio—a capital standard well above typical bank requirements. Both Ford Motor Company and General Motors must also support their respective banks' capital and liquidity positions.
GM Financial named Bill Donnelly as president and chief executive of its bank subsidiary, which the company said will provide "stable, cost-effective funding" and expand financing options for retail auto consumers. The approval orders expire if the banks are not established within 12 months, unless the FDIC grants extensions.
The move into banking follows a precedent set by other automakers. BMW and Toyota already operate industrial banks, and Ally Financial—originally GMAC—began as GM's captive financing arm before spinning off as an independent bank following the 2008 financial crisis.
For investors, the banking charters offer several potential advantages. Direct access to deposit funding could reduce the automakers' borrowing costs for their substantial auto lending portfolios, potentially boosting profit margins. The companies also gain greater control over their financing operations, allowing for more integrated customer experiences and potentially more competitive loan terms.
However, the expansion into banking also introduces new risks, including increased regulatory oversight and potential exposure to financial market volatility. Both companies will need to demonstrate strong risk management as they integrate banking operations with their core automotive businesses.