ALEXANDRIA, Va.—The American Bankers Association is asking NCUA to require “greater accountability” from credit unions seeking to acquire banks. The ABA made the request in a letter to NCUA Chairman Todd Harper Tuesday. The request includes requiring CUs to get membership approval on the buys and disclose the price of the deal.
ABA’s request follows comments from Independent Community Bankers of America President and CEO Rebeca Romero Rainey regarding the record number of CU purchases of banks this year. As CUToday.info reported, the deal between OneAZ Credit Union and 1st Bank Yuma set the one-year record for these agreements at 17. Sixteen was the previous record, established in 2022. And, as CUToday.info also reported, HAPO Community Credit Union’s deal to buy Community First Bank has taken the number to 18.
The ABA letter calls on the NCUA to require credit unions seeking to acquire banks “to receive membership approval, disclose financial terms, and demonstrate how combinations with banks might impact consumers, communities, and taxpayers.”
“In recent years, the credit union industry has expanded rapidly, and the speed and scale of credit union acquisitions of banks has grown at an unprecedented rate,” American Bankers Association President and CEO Rob Nichols said in a statement. “Taxpayers and credit union members deserve transparency and accountability, and relevant laws and regulations must be modernized to reflect today’s financial services marketplace. We’re hopeful that Chairman Harper and the NCUA will take the necessary steps to ensure the interest of credit union leaders aligns with the interests of both their members and the broader public.”
In the letter, Nichols notes that credit union acquisitions of banks are occurring more often than ever before: “The 18 deals announced so far in 2024 have already eclipsed the record 16 set in 2022, and total bank assets targeted by credit unions so far this year – more than $9 billion – have surpassed 2022’s record $5.15 billion.”
Industry Has Changed
The ABA letter emphasizes that today’s credit union industry has changed drastically since the passage of the Federal Credit Union Act in 1934.
“Credit unions have a statutory mission to serve those of modest means connected through a common bond in a local area,” Nichols wrote. “That mission of service, and their not-for-profit structure, has justified their exemption from most taxes and the Community Reinvestment Act (CRA) for decades. As growth-oriented credit unions pursue new markets and commercial lending via bank acquisitions, legislators, regulators, and even some within the credit union movement have raised objections. To the detriment of credit union member-owners whose capital is used to finance these transactions, terms are rarely disclosed.”
The letter also asks NCUA to build on the recommendations of a 2007 NCUA task force on executive compensation transparency for federal credit unions and incorporate additional transparency requirements for credit unions acquiring banks. The letter states that that "such measures will help prevent conflicts of interest and help restore some accountability across the credit union industry."