The National Credit Union Administration is facing criticism from a banking trade group for infusing capital into Texans Credit Union after conservatorship.

The Texas Bankers Association accused the NCUA of improperly supervising the $1.4 billion-asset credit union, which in December received $60 million in subordinated debt from the NCUA. The association urged the NCUA to consider selling the credit union's branches to Texas banks.

Texans has operated for more than seven years "without proper supervision ... and now, apparently, without any capital," wrote Eric Sandberg, the association's president and CEO, in a Feb. 9 letter to the NCUA. "Allowing insolvent credit unions to continue to operate as fully functioning depository institutions is unfair to their 'in-market' competitors and counterproductive to the overall health of the banking system."

In an interview Friday, Sandberg says it is unfair for the NCUA to back an insolvent credit union that does not pay taxes. That issue has been a long-standing debate between credit unions, which do not pay taxes, and banks.

Texans went into conservatorship in April 2011, largely from losses from commercial lending. In May, the association sent a letter disagreeing with the NCUA's decision to let the credit union operate as insolvent. The association claims that, without the NCUA's infusion, the credit union would have a net worth of negative $46 million.

The NCUA typically cites a rule that lets it provide assistance with debt-based capital as the "least costly resolution," compared to liquidating or a purchase-and-assumption agreement. Texans must repay the full amount with interest to an NCUA fund.

The association's letter also pushes the NCUA for a timeline for ending the conservatorship and information on additional carrying costs. The letter says "there would significant in-state interest" in the credit union's branches, located in north Texas and Austin.

A NCUA spokesman says it is working on a response.

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