The Independent Community Bankers of America says the increasing pace of credit unions acquiring community banks and the rapid growth of the credit union industry are placing community banks at risk.
In a letter penned July 7 to Treasury Secretary Janet Yellen, ICBA President and CEO Rebeca Romero Rainey urged Yellen to “examine the causes of the credit union-bank acquisition trend, its impact on small businesses, consumers and the tax base, as well as appropriate legislative and regulatory responses.”
A core component of the ICBA’s argument is credit unions should pay “exit fees” when purchasing community banks — equal to 10 percent of the gross value of the acquired bank’s assets or liabilities as shown on its most recent balance sheet, whichever is greater. The ICBA sees the fee as a chance for the government to capture at least part of the lost value of taxes the bank would have paid going forward had it remained independently owned or been acquired by another tax-paying bank.
Other Congressional options the ICBA sees as possible include:
- Taxing “the largest and/or most growth-oriented credit unions.”
- Taxing credit union commercial lending revenues.
- Instituting an excise tax on credit union marketing expenditures exceeding a given threshold.
- Creating the option for states to tax federal credit unions.
- Placing more regulatory scrutiny on credit union-bank acquisitions.
In the last five years alone, total assets of federally insured credit unions have grown by more than $610 billion — approximately 52 percent — and membership has increased by 21.7 million — more than 21 percent. Those growth trends come as the number of credit unions has declined 16 percent. Community banks have continued playing an important role during the pandemic, including making a majority of Paycheck Protection Program loans.
“We believe such transactions flout the original purpose of the credit union tax exemption, to serve people of modest means, and request that you direct your attention to this issue and take appropriate steps, administratively and in conjunction with Congress,” Romero Rainey wrote.