Surging Credit Union Acquisitions of Community Banks Threatens Taxpayers
Washington, D.C. (June 10, 2019)—The Independent Community Bankers of America® (ICBA) announced the formation of a new task force on the disturbing trend of large credit unions increasing their taxpayer-subsidized footprint by buying up smaller, taxpaying community banks. The ICBA Credit Union Task Force continues ICBA's long-standing call for policymakers to re-examine the credit union industry’s tax and regulatory subsidies.
"The recent surge in credit union acquisitions of community banks worsens banking industry consolidation, reduces tax revenues for local communities, and furthers the credit union industry's continued unbridled growth and encroachment into full-service banking," ICBA President and CEO Rebeca Romero Rainey said. "Through the ICBA Credit Union Task Force, ICBA and the nation's community bankers will be shining a light on this troubling trend, which yet again illustrates how far credit unions have strayed from the original purpose underlying their tax exemption. ICBA will continue our calls for tax and regulatory equity between tax-exempt credit unions and taxpaying community banks."
The asset disparity of institutions involved in these deals underscores their inequities. According to S&P Global data on the nine credit union-community bank acquisitions of the past year, the total assets of acquiring credit unions was $24 billion, while acquired community banks totaled $2.3 billion. These transactions amount to a loss of roughly $3.9 million in annual income taxes, with the federal cost of the credit union industry’s tax exemption costing taxpayers nearly $2 billion annually and rising, according to the Joint Committee on Taxation.
The inequity is exacerbated by the fact that credit unions are not subject to the full set of regulations that community banks face, including Community Reinvestment Act rules. Meanwhile, the National Credit Union Administration continues to act as an advocate for the industry it is charged with regulating. The NCUA has advanced a series of rules expanding credit unions’ ability to dodge membership restrictions, make commercial loans, and leverage their tax subsidy to raise capital from outside investors. It also has established bureaucratic obstacles and roadblocks to credit union conversions and mergers that make it more difficult for a bank to acquire a credit union than vice versa. Further, the agency failed to prevent credit union lending abuses in the taxi medallion scandal exposed by The New York Times, in which irresponsible lending dominated by half a dozen credit unions led to financial ruin for thousands of families as well as a spate of tragic taxi driver suicides. In a recent letter, ICBA urged Congress to investigate the role of the NCUA in this scandal.
The current rash of mergers is yet another indicator that tax-exempt credit unions have become virtually indistinguishable from taxpaying commercial banks. ICBA will continue calling on policymakers in Washington and state capitals nationwide to act on this unbalanced arrangement, re-examine the credit union industry’s tax and regulatory subsidies, and stop the NCUA’s efforts to drastically increase the powers of tax-exempt credit unions beyond their statutory limits.
The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. With more than 50,000 locations nationwide, community banks constitute 99 percent of all banks, employ nearly 750,000 Americans and are the only physical banking presence in one in five U.S. counties. Holding more than $5 trillion in assets, nearly $4 trillion in deposits, and more than $3.4 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at www.icba.org.
# # #