Wal-Mart shifts course

Wal-Mart Stores Inc. announced Friday it will withdraw its application for an industrial bank charter, nearly two years after it touched off a firestorm of debate over whether commercial firms should be allowed to own banks.

"We sat down and looked at our priorities for the year, and we decided that we had a lot of new things to launch: new products, new services and new formats," said Jane Thompson, president of Wal-Mart Financial Services. "We felt like the bank was taking our focus off some of those launches. No matter what we said, all anyone ever asked about was the bank."

Wal-Mart submitted its applications to the Federal Deposit Insurance Corp. and the Utah Department of Financial Institutions in July 2005. According to the applications, the bank would allow Wal-Mart to process credit card and debit card transactions in-house.

However, the applications languished as critics and congressmen expressed concern that allowing Wal-Mart entry into banking breached the historically protected line between banking and commerce, and that the retailer would use the industrial bank charter to muscle its way into consumer and retail banking, posing a threat to smaller competitors by offering similar services at better rates.

After receiving thousands of public comment letters, the FDIC in April held unprecedented public hearings on Wal-Mart's application. In July, the FDIC imposed a moratorium on industrial bank applications to allow it — and Congress — time to explore the issue. That moratorium was extended for at least a year in January.

Wal-Mart insisted throughout that it had no intention to branch or offer retail banking services.

"Wal-Mart's (application) has been surrounded by manufactured controversy since it was submitted nearly two years ago," Thompson said. "At no stage did we intend to use the ILC to establish branch banking operations as critics have suggested — we simply sought to reduce credit and debit card transaction costs."

FDIC chairwoman Sheila C. Bair called Wal-Mart's withdrawal "a wise choice."

"This decision will remove the controversy surrounding their intentions," Bair said. "They don't need an (industrial bank) to play an important role in expanding access to financial services."

Edward Leary, commissioner of the Utah Department of Financial Institutions, said Thompson contacted him early Friday to notify

him that Wal-Mart would be withdrawing its Utah application as well. The department had not yet accepted that application as complete.