ICBA to Congress: Stop credit union-bank deals or level the playing field

The Independent Community Bankers of America is calling on lawmakers to hold hearings on bank acquisitions by credit unions in the hopes of curbing such deals or at the very least enabling banks to purchase more CUs.

In a letter addressed to Sen. Mike Crapo (R-ID) and Sen. Sherrod Brown (D-OH), ICBA President Rebeca Romero Rainey described the trend of credit unions buying banks as a "disturbing development" and requested Congress exercise its oversight authority over the credit union industry and the National Credit Union Administration.

“[W]e urge you to use a committee hearing and your jurisdiction over the Federal Credit Union Act and the NCUA to explore available options for curbing the credit union-bank acquisition trend,” she wrote to the heads of the Senate Banking Committee in the letter dated Jan. 29.

Romero Rainey’s letter, which was also sent to the House Financial Services and Ways and Means Committees, also called on Congress to raise the standards required for NCUA to approve these transactions and ease restrictions for banks to purchase credit unions.

NCUA approved a proposal during its January board meeting that consolidated all existing rules regarding bank purchases, though none of its actions would change how easy or hard it is for credit unions to buy a bank. Romero Rainey criticized that rule for not providing guardrails on these transactions, and asked the Senate Banking Committee to ensure NCUA strengthens the regulation before it is approved and takes effect.
NCUA did not immediately respond to a request for comment.

A new NCUA proposal on subordinated debt, released during the same board meeting, does not explicitly prevent credit unions from using subordinated debt to purchase a bank. The trade group’s letter did not address that proposal.

Credit unions announced 16 bank deals in 2019, nearly double the amount from 2018. Most observers think it’s unlikely that number will be topped in the year ahead. NCUA Chairman Rodney Hood defended the trend in an op-ed published Thursday, saying these transactions “should be welcomed as a needed boost to financial inclusion efforts.”

Romero Rainey specifically pointed to last year’s largest deal, in which $10.4 billion-asset Suncoast CU in Tampa bought the $747 million Apollo Bank in Miami.

“The trend suggests that it will not be long before we see the first credit union acquisition of a bank with assets of $1 billion or more,” Romero Rainey wrote. Last fall the trade group unveiled a new campaign aimed at raising awareness of the issue.

The bank group indicated it might have fewer issues with credit unions buying banks if both sides had the same powers.

Romero Rainey said current NCUA rules create additional barriers that make it “nearly impossible” for banks to purchase a credit union or for a credit union to convert to a bank.

“A level playing field in this regard would go a long way toward addressing the concerns outlined in this letter,” she wrote.

In a statement released late Tuesday, the Credit Union National Association effectively called ICBA’s bluff.

"We welcome every opportunity to engage policymakers in a discussion about the difference credit unions are making in the lives of their members, how credit unions are fulfilling the mission of Congress gave them, and why it is more important now than ever that credit unions work to advance their communities and empower financial well-being,” Ryan Donovan, CUNA’s chief advocacy officer, said in the statement.