By Ray Birch
DETROIT—For nearly two decades, the conversation around bank-credit union acquisitions has largely flowed in one direction.
Credit unions have purchased hundreds of community banks, sparking repeated criticism from banking trade groups that argue tax-exempt credit unions have an unfair advantage when bidding for banks. The transactions have become common enough that most industry executives understand how they work, what regulators require and why some institutions pursue them.
But there is another path available under federal law—one that remains largely untouched even among seasoned industry observers.
A bank can acquire a credit union.
And according to Michael Bell, one of the country's most experienced financial institution deal attorneys, a newly proposed rule from the National Credit Union Administration could make that path easier to understand and potentially more attractive.
"What they are fixing and amending and making better is the rule that only applies if a bank buys a credit union," said Bell, partner and chair of the Financial Institutions Practice Group at Honigman LLP. "It's got nothing to do with credit unions buying banks. It's one direction only."
The NCUA's proposal, published April 22, would update regulations governing mergers of federally insured credit unions into banks for the first time since the framework was adopted in 2010. The proposal would eliminate a number of procedural, disclosure and communication requirements that the agency now considers overly prescriptive while maintaining core protections for members.
While the changes are relatively narrow, Bell believes the most important aspect of the proposal may be the attention it brings to a transaction structure many in both industries do not realize exists.
Simpler Path
Bell has advised on more than 75 whole-bank transactions and numerous branch buys nationwide and has become one of the best-known legal advisors in the credit union-bank acquisition space. Yet he said even many experienced executives remain unaware that NCUA’s proposed rule would make the pathway for banks to acquire credit unions simpler.
That lack of awareness is striking given the extensive debate over credit union acquisitions of banks during the last decade, he said.
"When we get pushback about credit unions acquiring banks, I'm quick to point out that this goes both directions," Bell said. "There's a clear pathway established for banks to acquire a credit union."
The existing regulatory framework was created after concerns emerged in the 2000s that some credit union conversions and merger transactions were driven more by executive or board interests than by member interests. The resulting 2010 rule imposed detailed procedural requirements, disclosure obligations and voting standards designed to protect members.
According to Bell, however, the rule became so complex that it discouraged use of the process altogether.
Bell stressed that the proposal is less about removing protections and more about making the process understandable.
Bank Buys Of CUs Considered
Over the last 15 years, Bell has represented credit unions involved in three potential bank acquisitions of credit unions. None ultimately closed, but each required extensive analysis of the existing regulations, he explained.
"We spent hours trying to map and timeline and chart the rule because it wasn't really clear," Bell said. "There were issues and it was confusing. We interacted with NCUA and pointed out areas where we were struggling."
The proposal appears aimed directly at those concerns, Bell said.
NCUA said the changes are intended to "reduce unnecessary regulatory burdens" while providing boards with greater flexibility to exercise business judgment. The agency said the revisions would simplify compliance, reduce administrative costs and modernize the merger process while continuing to ensure members receive clear disclosures.
Among the proposed changes:
- Newspaper publication requirements would be replaced with digital notices on websites and home-banking landing pages
- Prescriptive formatting requirements for disclosures would be removed
- Certain communication mandates would be simplified
- Non-binding voting guidelines would be removed from the regulations
- Boards would no longer be required to provide regulators with detailed descriptions of how they identified and negotiated with a merger partner
"The fact that they're clarifying it is only positive," Bell said.
One concern raised by some observers centers on the proposal's elimination of the requirement that boards explain how they located and negotiated with a merger partner.
NCUA argues the requirement is "overly intrusive" and that regulators should focus on whether directors can demonstrate the merger serves members' best interests rather than reviewing a detailed history of negotiations.
Michael Bell
One industry analyst told CUToday.info the change could reduce transparency.
"I think that can hide conflicts of interest," the analyst said. "I don't like that."
Bell sees the issue differently.
He noted that the proposal leaves intact the most important member protections established in 2010. Credit unions would still be required to conduct due diligence, obtain merger-value determinations, disclose compensation arrangements involving executives and directors, and ultimately submit the transaction to a member vote.
"The decision remains with the members," Bell said. "The governance of the credit union ultimately remains the same."
He emphasized that boards cannot simply decide to sell a credit union to a bank without member approval.
"In the end, every member has a voting right," Bell said. "For major decisions, members get to decide. That's always been the case."
The timing of the proposal is notable.
The credit union industry continues to consolidate, while credit union acquisitions of banks remain a prominent growth strategy for many larger institutions.
Meanwhile, the first merger under the existing modern framework did not occur until 2025, when Thrivent Federal Credit Union merged into Thrivent Bank following a lengthy approval process involving multiple regulators, according to legal analysis of the proposal included in a recent Law360 article.
Bell believes the proposal could help more executives evaluate whether a bank-credit union transaction makes strategic sense.
"When people learn about it, they become interested and realize it is an opportunity," he said.
‘Rare Transaction’
That doesn't mean Bell expects a flood of transactions.
"I think it's a rare transaction," he said.
But he does believe there are situations where a bank acquisition could be the best outcome for a credit union and its members, particularly when institutions face strategic challenges, sponsorship changes, capital limitations or succession concerns.
"This is fairly unknown and it should be known," Bell said.
NCUA has characterized the proposal as narrow in scope and largely deregulatory. The agency has also asked for public comment on whether supervisory committees should play a larger role in reviewing these transactions.
Bell suspects the broader significance may not be found in the technical regulatory revisions themselves. Instead, it may lie in reminding both industries that bank acquisitions of credit unions are not only legal but have a clearly defined regulatory path.
"This reminds me of 15 years ago when I was out there saying credit unions could acquire banks and people were surprised," Bell said. "Now everybody knows it."
His view is that mergers of credit unions into banks may be at a similar stage today—available, legitimate and potentially valuable, but largely overlooked.
"It's simply an option," Bell said. "Whether it occurs or how often it occurs is impossible to say. But there are only benefits from understanding it's available."