The American Banker is reporting that a trend has emerged of credit unions buying banks.
In the first quarter of 2018, four such deals were announced. In comparison, six deals were announced during 2017.
Michael Bell, an attorney at Howard & Howard law firm who specializes in these transactions, estimates that there are approximately 150 credit unions with the capital, management experience, and desire to buy banks. He told the American Banker that he is currently working on 20 possible deals.
However, these transactions suggest that the lines of distinction between banks and credit unions are blurring and raise several issues that need to be addressed by policymakers.
Credit unions are exempt from federal income taxation. However, banks are subject to federal taxation. The acquisition of a bank by a credit union shifts income from a taxable base to a non-taxable base. If credit unions are using their tax-exempt status to buy taxpaying financial institutions, then this warrants policymakers revisiting the credit union tax exemption.
In fact, these transactions have attracted the interest of Senate Finance Committee Chairman Orrin Hatch (R - UT), who earlier this year wrote National Credit Union Administration Chairman McWatters questioning whether credit unions have outgrown their tax exempt status.
Credit unions are also exempt from the Community Reinvestment Act (CRA), while banks are not. These acquisitions may potentially create gaps with regard to service and lending to low- and modest-income consumers. The Government Accountability Office reported earlier this year that policymakers should consider extending CRA to credit unions, although the Treasury Department did not act on this recommendation.
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Maybe what GAO and treasury should do is re-read their own previous analyses (yes multiple) where they make the case that certain credit unions are really banks that don’t pay taxes.
ReplyDeleteThen sit congress down like the spoiled children they are and put their nose in the lossed revenue for a reason that no longer exists.
We would leave the charter tomorrow if NCUA wasn’t in the way.
20% tax?
For ability to raise real capital and do more business lending and no more archaic field of membership hurdles?
No brainer.
but, you're right.
Deletencua is massively in the way.
and with zero accountability to anyone.
for sound cus, bank regulators are not the obstacle, are willing to work a charter change but when ready to approve cannot cross jurisdictions and intervene when they have fully witnessed the ncua act far beyond the law of the FCU Act and in broad daylight to hold good cus captive as future feed for the bigs. Congress does nothing.
we know. we've been there.
it's disgusting.
Disgusting and yet so NCUA.
DeleteAnd then we watch a NCUA cronies “retire” and feed off the industry like the crook Fenner.
Interesting. Can NCUA be charged with disparate impact?
DeleteAs a long-time community banker I hear credit unions say they were founded to help everybody in our county. Some say they must become a bank to realize this by shedding the credit union image of being a closed club denying equal access for all citizens. But no way with NCUA blocking charter change.
With open charters, today cus seem more like modern day mutual banks, but still called credit unions, still clubs, now open to more citizens but not actually used by everybody. Wonder what their D.I. stats are.
There is only one disparate impact credit unions care about and that’s the federal tax exemption.
DeleteThey couldn’t care less about all the other crap (except for a few CEOs too old and stupid to know better).
It’s all about the tax free income.
A cu director and a cu ceo.