Credit Unions Stay Above the Fray in Bank Regulator Merger Battle

A highly unusual fight broke out last week among banking regulators over supervision of bank mergers, and so far, credit unions are not in the line of fire.

On Thursday, Federal Deposit Insurance Corporation Director Martin Greunberg and Consumer Financial Protection Bureau Director Rohit Chopra issued a request for information on how well banking regulators review proposed bank mergers. By virtue of his position, Chopra is a member of the FDIC board.

During a Tuesday meeting of the FDIC board, Chairwoman Jelena McWilliams blocked that request from being an official action of the FDIC board.

Lost in that battle is the substance of the request issued by Chopra and Greunberg.

Even though banking trade groups have been vociferous in their outrage over credit unions acquiring banks, that issue is not addressed at all by the request for information about mergers issued by Chopra and Greunberg

In a statement following Tuesday’s meeting, Chopra made it clear that the request for information was a natural outgrowth of an Executive Order issued by President Biden in July. “The July order specifically requested that bank regulators review policies with respect to the Bank Merger Act,” Chopra said.

That Executive Order also does not mention banks being purchased by credit unions.

Chopra has said he is particularly interested in the law’s requirement that regulators review a proposed merger’s impact on businesses and families. He asked for feedback on how that should work. He also said that the law requires regulators to assess a merger’s impact on financial stability, adding that he would like to know how that should work as well. But Chopra did not mention credit unions in discussing his concerns about mergers.

Reaction from Capitol Hill to Chopra and Greunberg’s move was swift and partisan.

“The FDIC Board is right to move forward with this process and engage the public to better understand consolidation as it results in the loss of bank branches and other financial services, especially in rural communities across the country,” said Senate Banking Chairman Sen. Sherrod Brown, D-Ohio.

However, House Financial Services Committee ranking Republican Patrick McHenry of North Carolina accused Chopra and the Biden Administration of attempting a power grab at the FDIC. “In this attempt to circumvent FDIC Chair McWilliams, Mr. Chopra proved what Republicans have warned since his nomination: he has no regard for accountability, and he intends to politicize every agency he touches, including the CFPB, the FTC, and now the FDIC,” McHenry said.

None of the lawmakers in their comments mentioned credit union purchases of banks—a development that bankers say is ominous.

“A new factor driving the decrease in the number of banks is the continuing credit union tax subsidy which credit unions are using to acquire tax-paying banks in unprecedented numbers,” Jim Reuter, president/CEO of FirstBank in Colorado, told a House subcommittee in September. He added, “We urge lawmakers to examine this troubling trend and carefully consider whether Congress really intended for credit unions to use their federal tax exemption to buy up tax paying banks.”

So far, Reuter’s request has not gained traction among lawmakers or regulators.


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