Wal-Mart testimony inaccurate on bank leases
May 9, 2006
By Kristin Roberts
Reuters
WASHINGTON (Reuters) - Wal-Mart gave inaccurate testimony to U.S. regulators considering its application to open a bank, wrongly describing a provision of some leases signed by banks in its stores, according to leases obtained by Reuters.
The inaccuracy involves testimony Wal-Mart Stores Inc. (NYSE:WMT - News) gave to support its statement that it has no plans to replace community banks now in its stores with bank branches of its own.
The company last month told the Federal Deposit Insurance Corp., the agency reviewing Wal-Mart's application to start limited bank operations, that it has no plans to enter full-service banking, and it pointed to the leases signed by banks in its stores as evidence of its long-term plan to support independent banks.
Specifically, Wal-Mart told the FDIC that leases signed by banks were renewed at the discretion of the banks alone.
But documents seen by Reuters include a provision that requires both the bank and Wal-Mart to agree to renew.
According to industry sources, that provision is included in a handful, not all, of the leases signed by Wal-Mart's bank tenants.
RETAILER CITES "OVERSIGHT"
Wal-Mart told Reuters it was an oversight and that the testimony it gave to the FDIC it had believed to be true.
The retailer's lawyers are still reviewing the leases to identify how many include the provision that requires mutual renewal of the lease agreement. But a spokesman for the company, which is the world's largest retailer, said it will be a very small percentage of the company's 1,150 active leases.
Wal-Mart also said financial institutions whose leases include the mutual renewal provision can have their agreement changed to let the bank alone decide on renewal.
"It was an oversight," said Marty Heires, Wal-Mart spokesman.
Wal-Mart has applied to open a type of bank known as an industrial loan company or ILC to process electronic payments from its stores -- transmitting payment requests from shoppers to credit card issuers and then transferring payments back to Wal-Mart.
As a result, a Wal-Mart bank would be a conduit for such payments.
Bringing this function in house is expected to generate $10 million in revenue by the third year of operation. While that amount is only a small fraction of Wal-Mart's total revenue, it reduces what Wal-Mart says is the inefficiency of paying a third party to pass information between its stores and customers' banks.
While the company has repeatedly said it would not offer banking services to the general public, critics of the Wal-Mart plan say they do not believe that the retailer has no intention to enter full-service banking in the future.
The Federal Deposit Insurance Corp., the agency considering Wal-Mart's bank application, is reviewing lease agreements, according to sources.
biz.yahoo.com
May 9, 2006
By Kristin Roberts
Reuters
WASHINGTON (Reuters) - Wal-Mart gave inaccurate testimony to U.S. regulators considering its application to open a bank, wrongly describing a provision of some leases signed by banks in its stores, according to leases obtained by Reuters.
The inaccuracy involves testimony Wal-Mart Stores Inc. (NYSE:WMT - News) gave to support its statement that it has no plans to replace community banks now in its stores with bank branches of its own.
The company last month told the Federal Deposit Insurance Corp., the agency reviewing Wal-Mart's application to start limited bank operations, that it has no plans to enter full-service banking, and it pointed to the leases signed by banks in its stores as evidence of its long-term plan to support independent banks.
Specifically, Wal-Mart told the FDIC that leases signed by banks were renewed at the discretion of the banks alone.
But documents seen by Reuters include a provision that requires both the bank and Wal-Mart to agree to renew.
According to industry sources, that provision is included in a handful, not all, of the leases signed by Wal-Mart's bank tenants.
RETAILER CITES "OVERSIGHT"
Wal-Mart told Reuters it was an oversight and that the testimony it gave to the FDIC it had believed to be true.
The retailer's lawyers are still reviewing the leases to identify how many include the provision that requires mutual renewal of the lease agreement. But a spokesman for the company, which is the world's largest retailer, said it will be a very small percentage of the company's 1,150 active leases.
Wal-Mart also said financial institutions whose leases include the mutual renewal provision can have their agreement changed to let the bank alone decide on renewal.
"It was an oversight," said Marty Heires, Wal-Mart spokesman.
Wal-Mart has applied to open a type of bank known as an industrial loan company or ILC to process electronic payments from its stores -- transmitting payment requests from shoppers to credit card issuers and then transferring payments back to Wal-Mart.
As a result, a Wal-Mart bank would be a conduit for such payments.
Bringing this function in house is expected to generate $10 million in revenue by the third year of operation. While that amount is only a small fraction of Wal-Mart's total revenue, it reduces what Wal-Mart says is the inefficiency of paying a third party to pass information between its stores and customers' banks.
While the company has repeatedly said it would not offer banking services to the general public, critics of the Wal-Mart plan say they do not believe that the retailer has no intention to enter full-service banking in the future.
The Federal Deposit Insurance Corp., the agency considering Wal-Mart's bank application, is reviewing lease agreements, according to sources.
biz.yahoo.com