WASHINGTON — The Defense Credit Union Council is urging the Federal Deposit Insurance Corp. to revise its proposed bank merger rule, arguing that parts of the plan could disadvantage credit unions seeking to acquire banks.
DCUC said its objections center on the proposal’s separate treatment of service reductions in bank-to-credit-union transactions, its method for measuring market competition and the coordination of FDIC and National Credit Union Administration reviews. The organization said it does not oppose the broader goals of reviewing financial strength, service continuity and community needs.
“Credit unions are not-for-profit, member-owned cooperatives. That structure is central to our position on bank acquisitions,” DCUC President and CEO Anthony Hernandez, a retired U.S. Air Force colonel, said in a statement. “Our objection concerns the separate treatment of credit union buyers, not the requirement to examine financial strength, service continuity and community needs.”
Goal to be Faster
The FDIC board approved the proposed rule Sept. 17, saying it was intended to make reviews under the Bank Merger Act faster, more predictable and better tailored to each transaction’s risks. The proposal was published Sept. 22 and is not a final rule.
Under a provision cited by DCUC, the FDIC would separately consider reductions in products and services when a bank is acquired by a credit union, with such reductions potentially weighing against approval. The broader proposal also considers service changes in other types of mergers, and the provision would not automatically prohibit a bank-to-credit-union transaction.
DCUC called on the FDIC to replace the separate provision with a standard evaluating material effects on communities across all types of transactions. The council said that review should consider who uses an affected service, whether alternatives are available and affordable, what transition arrangements are offered and the transaction’s overall benefits and risks.
The council said it is not seeking automatic approval of credit union acquisitions or an exemption from consumer-protection requirements.
Other Concern Raised
Competition measurements are another concern, according to DCUC. The proposal generally would allocate a credit union’s market share equally among its branches when the institution has offices inside and outside a particular market.
DCUC said applicants should be allowed to submit evidence showing where members live and how they practically access the credit union’s services. It also asked the FDIC to clarify how NCUA approvals and supervisory findings would be incorporated into the FDIC’s review without eliminating either agency’s responsibilities.
The NCUA has described credit union acquisitions of banks as voluntary, regulated purchases of assets and assumptions of liabilities, rather than acquisitions of bank charters. Such transactions remain subject to regulatory approval and reviews of membership eligibility, financial capacity and deposit- and share-insurance arrangements.
Critical of Bank Criticisms
DCUC Chief Advocacy Officer Jason Stverak also criticized the Independent Community Bankers of America for campaigning against bank sales to credit unions.
“There is an irony here,” Stverak said. “Credit union advocates are defending a bank’s ability to consider the best qualified offer, including a credit union offer, while ICBA is campaigning against that option.”
Stverak contended that ICBA’s position is influenced by concerns about losing membership dues when a community bank is acquired by a credit union. ICBA’s opposition to such transactions has generally focused on credit unions’ federal tax exemption, competition and the potential removal of taxpaying banks from local markets.
The banking industry’s response to the FDIC proposal has not been uniform. DCUC said the American Bankers Association welcomed the plan’s modernization of competition guidelines. DCUC said its own objections are confined to provisions involving credit union buyers and questions about how the revised process would be implemented.
“Families do not experience a merger as a regulatory filing,” Hernandez said. “They experience it when they deposit a paycheck, seek a loan or ask for help.”
Hernandez said DCUC’s evaluation of transactions emphasizes member ownership and the services available after closing, particularly for military personnel, veterans and families managing their finances during deployments or relocations.
What Proposal Would Do
The proposed rule would not prohibit banks from selling assets to credit unions or impose an exit fee on such transactions. It also would create faster processing procedures for certain qualifying mergers and establish clearer filing timelines.
Comments on the proposal, identified as RIN 3064-AG18, are due Nov. 23. DCUC said it will continue monitoring the rulemaking and updating its Military Advocacy Committee and credit union leaders.
