BOSTON, Mass. – The regulatory burden that is compelling many smaller credit unions to merge with larger institutions is out of the hands of state regulators, representatives of the state agencies told Credit Union Journal.
“The regulatory burden on the federal level is increasing all the time and is very difficult for credit unions with fewer resources,” said Roger Little, deputy commissioner of Michigan’s Office of Financial and Insurance Regulation.
While a handful of states have programs in place to help facilitate communication and coordination between small CUs, most others take a hands-off approach, though members of the NASCUS board told Credit Union Journal during NASCUS’ annual meeting here no one is trying to consolidate the market.
“We don’t do anything to encourage CUs to consolidate,” said George Reynolds, NASCUS’s outgoing chairman and senior deputy commissioner at the Georgia Department of Banking and Finance “It’s really a decision for the management of credit unions. It’s important for us not to manage institutions. We have some credit unions that are very strongly capitalized but have weak earnings or negative earnings. We haven’t attempted to determine their strategic direction, although clearly you can’t lose money on a consistent basis for many years and continue.”
Regulators aren’t the only ones concerned about the regulatory pressure to merge. During a dialogue session here at NASCUS’s annual meeting, Credit Union ONE President John Lattanzi expressed concern over the rising number of mergers in the credit union industry, saying “very little is being done” to preserve small cooperatives. “When you walk in the door, the tellers know you by their first name. I’d hate to see our industry ruined because the small credit unions are gone,” he added.
Lattanzi was further worried that the constant stream of mergers is giving the banking lobby ammunition in their eternal fight to make credit unions subject to tax. The NASCUS board suggested smaller institutions take their concerns to NCUA and Congress, arguing that state regulators can do little to keep small CUs in business. “Our role, as we see it, is to maintain the safety and soundness of the system, not to maintain the number of institutions in the marketplace,” Little said.
