BOSTON-State regulators are saying new and constantly revised regulations that are compelling many smaller credit unions to merge with larger institutions are out of their hands.
"The regulatory burden on the federal level is increasing all the time and is very difficult for credit unions with fewer resources," said board member and Michigan's Office of Financial and Insurance Services Deputy Commissioner Roger Little.
While a handful of states do have programs in place to help facilitate communication and coordination between small CUs, most others take a hands-off approach, though the NASCUS board insisted that 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."
During a dialogue session here at NASCUS' 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 ongoing fight to change CUs' tax-status. State regulators suggested smaller CUs take their concerns to NCUA and Congress.
"Our role is as see it is to maintain the safety and soundness of the system, not to maintain the number of institutions in the marketplace," Little said.
The lack of new CU charters is telling, he noted, with the lack of access to capital the major hindrance. In that vein, NASCUS continues to champion supplemental capital, which could help a number of credit unions expand or at least better deal with expenditures that go along with regulatory compliance.
"Credit unions are the only institutions that are precluded from having their own owners to re-capitalize the institutions," reminded Little.
