Calif. League Says Bank Criticisms of MBL Have No Basis

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Bankers' public opposition to credit unions engaging in member business lending don't jibe with what they are saying privately, according to the California Credit Union League.

The league said that bankers' claims that small business lending activities "somehow create unfair competition, and bankers' general complaints about credit unions, are belied by responses to surveys that show that few bankers consider credit unions to be significant competitors in either business or consumer banking," the league said.

"When they're trying to rally their troops or win concessions from legislators, bankers often suggest that credit unions are about to drive banks out of business," said California league CEO David L. Chatfield. "But in candid surveys, credit unions barely register on bankers' competitiveness radar screen."

"The conclusion we can draw from this contradiction is that bankers have some sort of philosophical objection to not-for-profit financial institutions-they simply think that they shouldn't exist at all-or they look at bashing credit unions as a good way to divert attention from the conflicts between large banks and community banks, and attempt to keep the banking industry unified before Congress and state legislatures in their battles with mortgage companies, brokers, and realtors," Chatfield added.

Basis For Statements

The league said it based its conclusions on the results of two surveys of community bankers this year, one by the American Bankers Association, the other by accounting and business advisement firm Grant Thornton.

In the ABA's 2003 Community Bank Competitiveness Survey, community bankers ranked credit unions fourth among their business banking competitors, after large banks, other community banks, and broker-dealers. They ranked credit unions third among their consumer banking competitors.

The league noted that in most categories, 70% to 90% of respondents said they expected their current competitors to be the same ones they will be facing five years from now. In business operating loans, for example, 91.5% said there would be "no change from current competition;" on auto lending, 88.5% expected no change.

"I don't think we'd be seeing these kinds of numbers, or these expectations about future competition, from the nation's community bankers if credit unions were truly the threat that some in the banking industry make us out to be," Chatfield said.

Only 3.1% of respondents considered credit unions to be a "significant competitor" for operating loans, while 3.8% considered credit unions to be significant competitors for term loans. "A mere 1.9% said credit unions were significant competitors for business deposits," the league observed.

"With responses like these, banker complaints about credit unions providing member business services ring hollow and condescending," Chatfield said.

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