ICBA: Credit Union-Bank Deals Are Dangerous and Harmful
Independent Community Bankers of America renews call for congressional action
The nation’s community banks have seized on the recently announced purchase of a bank by Houston’s largest credit union to renew their demand that Congress act “on this dangerous and harmful trend.”
Texas Dow Employees Credit Union (TDECU), Houston’s largest credit union, announced on April 30 that it was purchasing Sabine State Bank and Trust Company, a Louisiana bank. When the transaction closes next year, the combined institution will have about $6 billion in assets and 471,000 Members.
“Tax-exempt credit unions now account for nearly a quarter of this year’s bank acquisitions, with each one expanding the federal tax exemption for more than $2 trillion in credit union assets and displacing a critical and trusted provider of credit in local communities,” Rebeca Romero Rainey, president/CEO of the Independent Community Bankers of America, said late last week.
Romero Rainey renewed her call for Congress to hold hearings on the bank purchase issue. She said the Government Accountability Office should conduct a study on the credit union industry and that Congress should consider requiring an exit fee to make up for the tax revenue lost when credit unions purchase banks.
She added that some state legislatures have begun taking action to try to block such deals. For instance, Tennessee Gov. Bill Lee recently signed legislation that the state’s banks may only be acquired by institutions insured by the Federal Deposit Insurance Corporation. In Colorado, lawmakers stripped from banking legislation a provision that would have allowed credit union acquisitions of the state’s banks.
Earlier this year, the ICBA released a poll showing that most Americans do not realize that credit unions are tax-exempt institutions. The ICBA poll of 4,416 adults was conducted January 11 through January 15 by Morning Consult. Of those responding, just 21% were aware that credit unions have a tax exemption and 68% said they thought credit unions were simply a type of bank.
While ICBA officials have been incensed over the credit union-bank deals, National Credit Union Administration officials said in a memo late last year that such deals are a small proportion of the overall consolidation occurring in the financial services marketplace.
In a memo, Kelly Lay, the NCUA’s director of the Office of Examination and Insurance, wrote that from 2011 to Sept. 30, 2023, the NCUA had approved 64 purchases of banks by credit unions. Lay noted that just during the first nine months of 2023 there had been 90 bank-to-bank purchases and 108 credit union-to-credit union mergers.