The National Credit Union Administration will propose a rule clarifying credit unions’ responsibilities when acquiring banks, NCUA Chairman Rodney Hood signaled in an interview with the Wall Street Journal reported today. The move comes at a time when credit unions are increasingly pursuing acquisitions of smaller banks—since 2018, 21 of these acquisitions have been conducted, compared to just 12 in the preceding five years, according to the article.
The American Bankers Association has long raised concern that this trend is yet another example of how credit unions are pursuing aggressive growth opportunities while falling short of their statutory mission to serve households of small means. Additionally, as ABA Chair-Elect Laurie Stewart pointed out in the WSJ story, when taxpaying banks convert to tax-exempt credit unions, the local community loses a vital revenue stream. “When an entity is in business doing the same thing and gets a free ride, that’s bad for public policy,” Stewart said. “And it’s bad for communities.”
A report commissioned earlier this year by ABA called for renewed policymaker and public attention to the credit union tax exemption and mission. “The substantive mission-driven aspects of the credit union charter that are supposed to make them unique and justify many taxpayer benefits have eroded, if not ended,” the report’s author, Karen Shaw Petrou of Federal Financial Analytics, told the Journal.
