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Wal-Mart Stores has promised that it will acquire a bank somewhere other than California, now that the state has implemented a new law that prevents the retailer from buying a small financial institution called an “industrial loan bank” there.

The retailer said it wanted to buy a bank so it could lower its transaction fees as well as provide itself with internal financial services.

According to the Sacramento Business Journal, a Wal-Mart spokesman criticized the state government for the new law. “We will continue our efforts, and they won't be in California,” said Bob McAdam. “This sends a bad signal to businesses that are doing business in California. You never know when they are going to change the rules on you.”

Analysts seem to believe that Wal-Mart eventually will be successful in its quest to buy a bank, and there is concern within the banking community that once it does so, the company’s goals will be to become a full service financial institution competing with every other bank in the country.

Among the other states that have industrial loan banks that might be for sale are Colorado, Utah and Nevada. While deposits in industrial loan banks are FDIC-insured, these institutions are not regulated by the Federal Reserve; such regulations put more stringent restrictions on the company that owns the bank.
KC's View:
Seems to us that maybe the banking industry could benefit from a little Wal-Mart-style competition. Can you just imagine what would happen if Wal-Mart came in and offered credit cards with half the interest rates the other banks are charging, still allowing it to make a profit without raping the American public? Under those circumstances, who wouldn’t want a Wal-Mart credit card? Or mortgage? Or bank account?

By the way, thanks to MNB user J.M. Kenderdine, who sent us the following email on this subject:

“Wal-Mart already has ‘a close relationship’ with Arvest Bank in
Oklahoma. I believe Arvest was created out of the holdings of Northwest
Arkansas Bankshares after they had acquired several small Oklahoma banks (at least one from the FDIC). While I don't believe Wal-Mart has any
direct ownership interest in Arvest, they do have a very close working
relationship with Arvest operating branches in a number of Wal-Mart
Supercenters in Oklahoma (and I believe Arkansas).

“If Wal-Mart really plans to enter the financial services market, I would expect them to try and do it first in an area where the competition is weaker than I suspect it is in California. It will take them time to work out the details of how to effectively compete and they would want to do that in markets where well established, dominant competitors would not be able to stop them before they really got started.”