Federal Reserve Governor Michelle Bowman said the increase in credit union acquisitions of taxpaying community banks indicates regulators should rethink how they evaluate bank mergers.

Credit Union Evolution: Speaking at the 2022 Community Banking Research Conference in St. Louis, Bowman said many credit unions have expanded their fields of membership “well beyond” traditional common bond requirements. She said the recent increase in credit union acquisitions of community banks underscores rising credit union competition.

Direct Competition: “Credit unions today are much more likely to compete directly with traditional banks offering the full ‘cluster’ of banking products and services than they did in 1995, which supports the argument that our analysis needs to give more weight to competition from credit unions,” she said.

Farm Credit: Bowman also cited rising competition from the Farm Credit System and other nonbanks as well as online deposit gathering as developments that warrant a modernization of regulators’ competitive analysis, which she said would help community banks meet the needs of their communities.

ICBA Comments: Bowman’s speech aligns with ICBA’s September 2020 comment letter encouraging the Justice Department to update its guidelines on reviewing bank mergers by:

  • Prioritizing mergers in small markets that preserve the financial viability of small banks.

  • Instituting parity in its considerations of credit unions, FCS lenders, and online banks.

Credit Union Efforts: Meanwhile, ICBA continues pressing policymakers to investigate credit unions, testifying in July on their Community Reinvestment Act exemption and writing in a Medium op-ed that Congress should join states in pushing back against credit union overreach.

Grassroots: Community bankers can continue urging Congress to hold hearings on the credit union tax exemption using a customizable message to lawmakers on ICBA’s Wake Up page and its Wake Up Messaging Playbook.