Bowman: Credit union acquisitions show need for rethinking merger standards

Credit union acquisitions of community banks support the case for including credit unions and other nonbanks in regulatory policies on proposed bank mergers, Federal Reserve Governor Michelle Bowman said.

Credit Union Acquisitions: Speaking at the 2023 Community Banking Research Conference in St. Louis, Bowman said the current system for evaluating mergers systematically ignores credit unions, despite five announced acquisitions of community banks by credit unions last month. “Despite this trend, after a community bank has been acquired by a credit union, the resulting credit union is no longer viewed as a baseline competitor with other community banks in the market,” she said.

Inferior Lenders: Bowman also cited credit unions in discussing the harmful impact of over-regulation or excessive compliance burden on community banks. “While it might be tempting to assume that alternative sources of credit would arise to fill a gap left by community banks, this is not a given,” she said. “For example, while credit unions compete with banks in many banking markets, credit unions are not, by design, by structure, and by regulation, small business lenders.”

ICBA Input: ICBA has repeatedly urged regulators to consider competition from credit unions and other nonbank institutions as they reconsider policies on bank mergers, including in comment letters to the FDIC and to the Justice Department.

FDIC’s Hill: FDIC Vice Chairman Travis Hill last month said his agency should consider competition from credit unions and other nonbanks if it reopens its policies on bank mergers. Hill’s remarks followed a meeting with ICBA about the surge in credit union acquisitions of community banks.