Critics of credit union-bank mergers have it all wrong
Since 2010, the total number of banks and credit unions in the United States has dropped by an astounding 31% to only 10,537 financial institutions left.
Yet over the past two years, there have only been a handful of credit union-bank mergers, compared to nearly 400 mergers between banks. While not new, there has been much discussion leading to misinformation regarding credit union-bank mergers by the banking trade associations. This information is deeply misleading for several reasons.
First, while credit unions have grown slightly over the past decades — a 2% increase in market share from 1992 to 2018 — it is the big banks that are devouring community banks. Second, the 15 largest banks have grown substantially since the financial crisis, even with increased regulation and some incurring billions in fines for consumer abuses.
Lastly, the total market share of total assets of the largest 100 banks is 74.9%, crunching smaller banks down from 53.3% in 1992 to just 17.4% in 2019, according to recent data. And credit unions own just 7.6% of the market.
When a bank closes its doors, who suffers? People, families and whole communities. But to opponents of credit union-bank mergers, it appears they would rather have the branches, lending capacity and economic benefits abruptly exit the community than be serviced by a credit union.
In a recent hearing before the House Financial Services Committee, NCUA Chairman Rodney Hood said it best: “If it weren’t for credit unions acquiring some of these banks, then the community would be left without a financial institution — it would leave them vulnerable to pernicious payday lenders.”
More so, when a credit union buys a bank, it still retains its unique characteristics and is subject to strict statutory prohibitions and limits on powers as set out in the Federal Credit Union Act. This includes field-of-membership requirements, business lending caps and capital limitations.
So why are banks outraged by credit unions? It’s simple: a desire to increase their own profits by working to undercut a competing yet separate industry.
Make no mistake, banking groups will continue to cry foul. They will continue to fund and propagate studies designed to undermine credit unions. They will continue to create misleading, anti-credit union social media accounts.
And they will continue to launch campaigns to oppose credit unions’ tax -exempt status, which could result in America losing $38 billion in tax revenue, $142 billion in GDP and 900,000 jobs over the next 10 years.
Yet these same banking groups won’t make a peep about their $21 billion tax windfall they received as a result of the Tax Cuts and Jobs Act of 2017. Nor will they openly acknowledge how nearly one-third of U.S. banks enjoy Subchapter S status, thereby allowing them to distribute untaxed profits directly to their shareholders and avoid paying federal taxes.
Meanwhile, credit unions will continue to pay every cent of local and state income taxes, sales tax and payroll taxes, while returning profits to its members in the form of higher savings rates and lower interest rates on loans.
Finally, the bank’s CEO, management team, board of directors and shareholders made the decision to sell to a credit union.