Millions of people across our nation are hurting from a K-shaped recovery, and some financial institutions are leaving them behind. America’s credit unions and Credit Union National Association remain focused on improving credit union members’ financial well-being, but in Washington and state capitals around the country, the American Bankers Association and Independent Community Bankers of America want to continue to fight old, settled battles at the expense of the communities they should serve.
The issue du jour involves a trivial number of relatively small banks that have decided to sell to credit unions. Even though these transactions pale in comparison to a much larger number of bank-to-bank sales – 42 to 2,343 over the last 10 years according to the Federal Deposit Insurance Corporation – the banking trade groups have run to Congress and state legislatures to block banks’ ability negotiate these deals, suggesting that these transactions rob the government of tax revenue.
This couldn’t be further from the truth.
Most of the banks that sell to credit unions paid little or no taxes in the preceding years, and the taxes credit unions paid on these transactions – 24.5 percent of the total transaction value – often exceed the taxes the banks had paid in recent years. Additionally, any bank sales to credit unions must be approved by state and federal regulators.
Outrage over these transactions ignores the real issues at hand: Too many consumers are hurting, too many lack convenient access to safe and affordable financial services and too many small financial institutions – banks and credit unions alike – have found it impossible to keep up with the cost and complexity of compliance with an ever-increasing regulatory burden flowing out of the Consumer Financial Protection Bureau and other regulators. This forces the leaders of struggling banks to either close or to fulfill their fiduciary duty to shareholders by taking the best offer available – whether it comes from a megabank, local competitor or credit union.
Sadly, many communities are well aware of what happens when their local bank sells to a megabank or local bank competitor. The tellers who know their customers by name are often let go as the branch that was once a community pillar is boarded up. The only winners are the bank shareholders who receive a windfall thanks to their investment.
To the chagrin of banking trade groups, bank-to-credit union sales represent the only transaction of their kind in which every stakeholder – bank customers, employees, shareholders and credit union members – wins.
Acquiring credit unions almost always continue to operate the bank’s branches: The No. 1 reason why credit union CEOs agree to an acquisition is to expand their branch network and the geographic areas their credit union serves. Credit unions’ pro-consumer, pro-community approach is a stark contrast to recent trends in the banking sector, where banks closed more than 13,000 branches – 14 percent of all branches – between 2008 and 2020.
When banks sell to credit unions, the credit union will often retain the bank’s branches and employees. This allows consumers who would otherwise be potentially left in a banking desert to keep access to locally provided financial services, often with better terms rates.
Banking trade groups apparently want Congress and state legislatures to prevent their member banks from selling to credit unions – but doing so would have a fundamentally adverse impact on local communities and their access to financial services, hurt efforts to promote financial equity and undermine free-market forces in which shareholders receive the best return on investment.
The banking trade groups may not like it when their members sell to credit unions because it means they lose a dues-paying member, a concern that I can appreciate as a trade association executive. But these times call for “we” over “me” and it’s clear that “we” – consumers, bank employees, credit union members and even bank shareholders – win when a bank sells to a credit union.
Rather than fighting old turf wars aimed at advancing their narrow self-interests, the ABA and ICBA should focus on serving communities ravaged by the pandemic. Banks that sell to credit unions ensure continued access to locally provided, safe and affordable financial services. These types of sales help prevent new banking deserts from developing. They should be encouraged — not impeded.
Ryan Donovan is the executive vice president and chief advocacy officer of the Credit Union National Association, the largest trade group representing America’s credit unions and their 120 million members.
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