Another Credit Union Bank Acquisition Subsidized by Taxpayers Demands Response from Policymakers

Washington, D.C. (June 4, 2024) — Independent Community Bankers of America (ICBA) President and CEO Rebeca Romero Rainey issued the following statement after this year’s 12th acquisition of a tax-paying bank by a tax-exempt credit union.

“ICBA and the nation’s community banks have repeatedly warned about the dangers of tax-exempt credit unions acquiring tax-paying community banks, and this dangerous trend is only accelerating — accounting for roughly a quarter of this year’s banking industry acquisitions. Each acquisition expands the federal tax exemption for more than $2 trillion in credit union assets and displaces trusted providers of credit in local communities — while demonstrating the urgency of addressing the burdensome regulatory environment.

“A rash of rulemakings adding 7,000 pages of new rules since July combined with taxpayer-funded subsidies for the credit union industry are driving an irreversible loss of community banks in local communities nationwide. And while the sluggish merger approval processes of federal banking regulators constrain bank-to-bank deals, the National Credit Union Administration’s bureaucratic obstacles and roadblocks to credit union conversions and mergers make it more difficult for a bank to acquire a credit union than vice versa — further driving the replacement of tax-paying community banks with out-of-state, tax-exempt institutions in all-cash deals.

“Congress must act on this dangerous trend. While states such as Tennessee, Colorado, Minnesota, Mississippi, and Nebraska have acted to restrict these deals, Congress should respond to what is clearly a national issue with implications for local communities from coast to coast. ICBA and community bankers continue calling on Congress to hold hearings, request a Government Accountability Office study on the credit union industry, and consider an ‘exit fee’ on these acquisitions to capture the value of the tax revenue lost once the acquired bank’s business activity becomes tax-exempt.

“ICBA polling conducted by Morning Consult shows Americans support a congressional review of credit union policy, including the industry’s tax and Community Reinvestment Act exemptions. Lawmakers have not only their constituents on their side, but also historical precedent. In 1951, Congress revoked the tax exemption for building and loan associations, cooperative banks, and mutual savings banks, finding that these institutions operated much like commercial banks and should be taxed accordingly.

“With community banks leading the way in serving small businesses and agricultural lenders, Congress should similarly investigate the nation’s outdated credit union policies and whether the government should continue subsidizing acquisitions of local, taxpaying community banks.”

About ICBA

The Independent Community Bankers of America® has one mission: to create and promote an environment where community banks flourish. We power the potential of the nation’s community banks through effective advocacy, education, and innovation.

As local and trusted sources of credit, America’s community banks leverage their relationship-based business model and innovative offerings to channel deposits into the neighborhoods they serve, creating jobs, fostering economic prosperity, and fueling their customers’ financial goals and dreams. For more information, visit ICBA’s website at icba.org.