Editor's Note: In her most recent column, Credit Union Journal Editor in Chief Lisa Freeman asked readers to share their thoughts on whether there is such a thing as "too small to survive." To join this important discussion, readers can post comments in the discussion section at the bottom of any article or email
Your July 8, 2016 column about small credit unions and their ability to survive raises some interesting points and stimulates a conversation about their status and future.
I am certain that there are some who believe that a financial institution with only $23,000.00 in assets, as you point out is the smallest credit union in the nation, has no business being in business. They would argue that an institution that size cannot provide the services their members need and that their plan going forward should be to merge with a larger one or just cease to operate.
Individuals making that argument seem to forget that many credit unions were once very small before they grew to be giants in the industry. They also forget that credit unions were started by individuals to meet the needs of the members of the chartering institution. They also need to remember that it is the decision of those members and their boards of directors to either grow, as some have chosen to do, or remain small while determining what services they can provide for their members.
As long as an institution is solvent, operates in a safe and sound manner and is in compliance with the law and regulations under which they are chartered, they are legally entitled to remain in business.
At some point in time those small credit unions may decide that a merger is in the best interest of its members. Each month NCUA approves the merger applications of numerous credit unions that have decided working with another entity is the right move. Such decisions are not being made only by small credit unions but larger ones as well who join together to become even bigger.
I personally believe the system works best when sound institutions decide for themselves whether to continue to operate independently or pursue a merger partnership. I do not believe there should be any regulatory or legislative mandate that requires a fiscally sound but small institution to cease operations.
NCUA has made attempts to help smaller institutions operate more efficiently by removing some of the regulatory burdens that have been placed on them. If the CFPB took a similar position it would help even more.
The number of small credit unions will continue to decline as a result of competition, market forces and the decision by its board and members that the time has come to no longer be autonomous.
That decision must continue to be theirs alone.
— Michael E. Fryzel, CU attorney/consultant, Chicago, and former NCUA chairman.
