ICBA urges Congress to crack down on CU-bank deals

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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 credit unions.

In a letter to congressional leaders, ICBA President and CEO Rebeca Romero Rainey described the trend of credit unions buying banks as a "disturbing development" and asked Congress to exercise its oversight authority over the credit union industry and the National Credit Union Administration.

“We 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 Senate Banking Committee Chairman Mike Crapo, R-Idaho, and Sen. Sherrod Brown, D-Ohio, the ranking member, in the Jan. 29 letter. The ICBA also sent the letter to the Senate Finance Committee, House Financial Services Committee and House Ways and Means Committee.

Romero Rainey’s letter also called on Congress to raise the standards required for the NCUA to approve these transactions and ease restrictions for banks to purchase credit unions.

The 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 lawmakers to ensure the NCUA strengthens the regulation before it is approved and takes effect.

The NCUA did not immediately respond to a request for comment.

A new NCUA proposal on subordinated debt, released during the same board meeting, would 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 such deal, in which the $10.4 billion-asset Suncoast Credit Union in Tampa bought the $747 million-asset 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 said it would be open to congressional hearings.

"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.

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