Buying Banks

In the last couple of years, four banks have been bought by credit unions and a fifth transaction is in process.

Mike Bell, a lawyer that represented at least one credit union that acquired a bank, has written two columns on the subject for Credit Union Executive Society.

The first column, Buying a Bank, looked at a three part litmus test that any credit union needs to address before buying a bank -- safety and soundness, impermissible assets, and field of membership issues.

The second column, Why Aren't You Buying a Bank?, points out that regulators are becoming more comfortable with these transactions. He points out such a transaction would add positive cash flow to a credit union's bottomline from day one, would potentially expand its geographic footprint, and would provide an opportunity to acquire talent, especially in the business lending area.

As I have stated previously, I have no objection to credit unions buying banks; but it should be a two way street. Banks should be able to buy credit unions.

However, I believe the leadership at NCUA has a problem with a bank buying a credit union. In the past, NCUA leadership has openly stated that the best charter for consumers is a credit union charter. Such comments pre-judge the process and raise regulatory hurdles to such transactions.

One last point I would like to make -- if Mike Bell's premise is correct that more credit unions will buy banks, this should cause policymakers to revisit the credit union tax exemption, as the tax exempt sector acquires more taxpaying entities.