ABA to NCUA: Public Deserves Greater Transparency in CU-Bank Acquisitions

In a letter sent to National Credit Union Administration Chairman Todd Harper today, American Bankers Association President and CEO Rob Nichols commended the agency for its renewed focus on credit union transparency and urged it to require greater accountability from credit unions seeking to acquire banks. The NCUA has indicated it may issue a Notice of Proposed Rulemaking related to this issue as soon as this month. 

The ABA letter calls on the NCUA to require credit unions seeking to acquire banks “to receive membership approval, disclose financial terms, and demonstrate how combinations with banks might impact consumers, communities, and taxpayers.” 

“In recent years, the credit union industry has expanded rapidly, and the speed and scale of credit union acquisitions of banks has grown at an unprecedented rate,” Nichols said in a statement accompanying the letter filing. “Taxpayers and credit union members deserve transparency and accountability, and relevant laws and regulations must be modernized to reflect today’s financial services marketplace. We’re hopeful that Chairman Harper and the NCUA will take the necessary steps to ensure the interest of credit union leaders aligns with the interests of both their members and the broader public.”

In the letter, Nichols notes that credit union acquisitions of banks are occurring more often than ever before: “The 18 deals announced so far in 2024 have already eclipsed the record 16 set in 2022, and total bank assets targeted by credit unions so far this year – more than $9 billion – have surpassed 2022’s record $5.15 billion,” with more such transactions in the works.

The ABA letter emphasizes that today’s credit union industry has changed drastically since the passage of the Federal Credit Union Act in 1934.

“Credit unions have a statutory mission to serve those of modest means connected through a common bond in a local area,” Nichols wrote. “That mission of service, and their not-for-profit structure, has justified their exemption from most taxes and the Community Reinvestment Act (CRA) for decades. As growth-oriented credit unions pursue new markets and commercial lending via bank acquisitions, legislators, regulators, and even some within the credit union movement have raised objections. To the detriment of credit union member-owners whose capital is used to finance these transactions, terms are rarely disclosed.”

The letter goes on to urge the NCUA to build on the recommendations of a 2007 NCUA task force on executive compensation transparency for federal credit unions and incorporate additional transparency requirements for credit unions acquiring banks. The letter argues that "such measures will help prevent conflicts of interest and help restore some accountability across the credit union industry."

Read the full letter.