The U.S. Federal Deposit Insurance Corp. said on Friday that Wal-Mart Stores will withdraw an application to open a specialty bank.
"Wal-Mart made a wise choice," FDIC Chairman Sheila Bair said in a statement. "This decision will remove the controversy surrounding their intentions."
In a statement, Wal-Mart said, "Unlike dozens of prior (Industrial Loan Company) applications, Wal-Mart's has been surrounded by manufactured controversy since it was submitted nearly two years ago. 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."
Wal-Mart said it still intends to introduce financial services to customers, but the company opted to withdraw its application "since the approval process is now likely to take years rather than months."
The latest development comes one day after a U.S. lawmaker released an e-mail he said indicates the company's interest in consumer banking extends beyond what it had previously disclosed to banking regulators.
Wal-Mart's 2005 application with the FDIC to open a bank to internalize credit card and check transactions to save money drew immense opposition from community banks that feared their demise after the giant retailer entered their business.
"They don't need an ILC to play an important role in expanding access to financial services by partnering with banks and others," Bair said.
The controversy isn't over quite yet, reported CNBC's Hampton Pearson. Next week, the House of Representatives' Financial Services Committee plans to hold hearings on companies such as Wal-Mart and Home Depot that are trying to find ways to expand financial services in their stores.
Home Depot said it remains committed to its FDIC bank application, and is "in no way" affected by Wal-Mart's decision.