Ford Motor Co. and General Motors have cleared a key regulatory hurdle after federal banking regulators approved their applications to establish industrial banks, a move that gives the two Detroit automakers more flexibility in how they finance vehicles and manage consumer lending.
The Federal Deposit Insurance Corp. (FDIC) recently announced it's approved deposit insurance applications tied to industrial bank charters backed by Ford and GM affiliates, allowing the companies to move forward with plans to operate banks that can take insured deposits while remaining owned by commercial companies.
Industrial banks, sometimes called industrial loan companies, occupy a narrow corner of the U.S. banking system. Unlike traditional banks, they are allowed to be owned by non-financial corporations, including automakers and retailers. In exchange, they are typically limited in scope and subject to oversight by both state regulators and the FDIC.
For consumers, the move is unlikely to bring immediate, visible changes at the dealership. Auto loans, leases and incentive programs will continue to look familiar. Behind the scenes, however, the approvals give Ford and GM more control over how vehicle loans are funded and managed, which could translate into operational savings and more stable financing options over time.
Both companies already operate large captive finance arms that handle billions of dollars in auto loans and leases each year. Ford Credit and GM Financial are central to how vehicles are sold in the U.S., offering everything from promotional financing to commercial fleet lending. The industrial bank structure allows those finance units to accept customer deposits, rather than relying as heavily on wholesale funding or capital markets.
In practical terms, deposits can be a lower-cost and more predictable source of funding than borrowing money during volatile market conditions. That stability can matter during periods of rising interest rates or economic uncertainty, when credit can tighten quickly.
The FDIC emphasized that industrial banks must still meet strict safety and soundness standards, including capital requirements and ongoing supervision. Regulators have historically been cautious with these charters, particularly when large commercial firms are involved, because of concerns about mixing banking and commerce.
Industrial banks are legal under federal law, but they remain controversial. Banking trade groups have long argued that allowing commercial companies to own banks creates risks and competitive imbalances. Supporters counter that industrial banks have existed for decades and have generally performed well, with limited impact on the broader financial system.
Utah has been the primary home for industrial banks, thanks to a regulatory framework that explicitly permits them. Several well-known companies, including retailers and technology firms, already operate under similar charters.
For Ford and GM, the approvals come at a time when automakers are under pressure to manage costs, navigate shifting interest rates and adapt to changing consumer demand. Vehicle affordability remains a major concern, and financing terms can play a decisive role in whether shoppers move forward with a purchase.
Analysts note that while the charters will not lower car prices overnight, they could help the automakers smooth out financing cycles and reduce reliance on external funding during downturns. That, in turn, could help ensure that attractive loan and lease programs remain available even when credit markets are strained.
The FDIC said the approvals were conditioned on commitments related to governance, risk management and ongoing regulatory reporting. As with other insured banks, the new institutions will be subject to regular examinations.
Neither automaker indicated that the banks would operate as consumer-facing retail institutions in the traditional sense. Customers should not expect to see Ford or GM checking accounts advertised alongside vehicle sales. The focus remains squarely on supporting auto finance operations.
Still, the decision marks an important strategic shift. By securing FDIC approval, Ford and GM gain a tool that few automakers have, reinforcing the growing role finance plays in the modern auto business.
As vehicles become more expensive and loan terms stretch longer, access to reliable, low-cost funding is increasingly critical. The industrial bank approvals give Ford and GM another lever to pull as they navigate an industry facing rapid change, tighter margins and heightened scrutiny from regulators and consumers alike.
Photo: Ford.