Wal-Mart Withdraws Banking Plan

It cites 'manufactured controversy.'
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Updated from 11:18 a.m. EDT

Wal-Mart

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withdrew its application to open a banking unit, citing "manufactured controversy."

The Bentonville, Ark., retailer had said it wanted an industrial loan company charter so it could reduce credit and debit card transaction costs. Critics opposed the application because they claimed Wal-Mart would get into retail banking and drive small local banks out of business.

Wal-Mart denied that it sought to open a bank, but regulators responded to the criticism by issuing a moratorium on evaluating applications for so-called industrial loan corporations, or ILCs.

"Unlike dozens of prior ILC applications, Wal-Mart's has been surrounded by manufactured controversy since it was submitted nearly two years ago," the company 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.

"Since the approval process is now likely to take years rather than months we decided to withdraw our application to better focus on other ways to serve customers," the company added.

In a statement, FDIC Chairman Sheila C. Bair said Wal-Mart made a "wise choice."

"This decision will remove the controversy surrounding their intentions," Blair said. "They don't need an ILC to play an important role in expanding access to financial services, they can do so by partnering with banks and others."

Fellow retailer

Home Depot

(HD) - Get Report

has also applied for a banking license with the FDIC. The home improvement giant said it would use the license to make home improvement loans.

Shares of Wal-Mart recently were up 10 cents to $46.10.