Isn't it time that NCUA permit banks to purchase the assets and assume the liabilites of financially troubled or failing credit unions?
The announcement of United Federal Credit Union to purchase substantially all of the assets and assume the deposits of Griffith Savings Bank or last year's purchase of Anchor Bank's branches by Royal Credit Union are examples of this outside of the box thinking.
Both Anchor Bank and Griffith Savings Bank were in financial difficulty and these transactions appear to be in the best interests of their institutions and their communities.
NCUA may want to take a page out of this playbook as the best way for NCUA to handle some problem credit unions, such as A.E.A. FCU and Texans CU, which are currently in conservatorship.
Let's face it -- there are only a couple credit unions that could digest Texans CU.
Allowing banks to bid for failing credit unions would increase the pool of potential merger partners. With more bidders, this could lower the cost to the NCUSIF in resolving these institutions.
As for the rights of the members, I don't think that is an issue.
The equity interest of the members in these financially troubled credit unions have been wiped out. As for the members' voting rights, they no longer exist as NCUA's emergency merger powers can force a merger without a memebership vote and in many cases, NCUA is running the credit union, which includes removing the credit union's board of directors.
I suspect that for such a transaction to take place NCUA will need to amend its thinking that a suitable merger partner is a continuing credit union.
FDIC won't put credit unions on the “Bid list” for the increasingly large number of failing banks, either. It's been tried, blocked by banker politics, statutory and regulatory specifics.
ReplyDeleteIf the walls were to come down, and given the 10:1 failure ratio, the CU system would be the long-term beneficiary, banks the losers; as cooperative finance continues its inevitable ascension.