The National Credit Union Administration today issued two proposals with significant and troublesome implications for taxpayers.
One proposed rule would allow large credit unions to issue subordinated debt from outside for-profit investors—such as corporate debt markets—while maintaining their tax-exempt status. American Bankers Association President and CEO Rob Nichols called this move by the credit union watchdog “disappointing” and “concerning” for taxpayers. “Allowing large credit unions to issue debt to outside, for-profit investors could misalign the incentives of credit union executives with their member owners, and potentially crowd out low-income credit unions’ ability to raise secondary capital,” Nichols said. “Policymakers should be concerned that today’s proposal doesn’t require that the additional capital be used to serve the low- to moderate-income consumers that credit unions were created to help.”
A second proposal would formalize a process for credit unions purchasing banks, which ABA also strongly opposed. “Given that we have already seen a wave of these acquisitions over the last few years, now is not the time for the NCUA to create additional tools to encourage more of these deals,” Nichols said, urging lawmakers to look closely at these proposals and the rapidly changing credit union industry.