As Prepared for Delivery on January 23, 2020
Thank you for your presentation and your work on this proposal. I also want to thank the NCUA staff who participated in the Office of Examination and Insurance working group for their knowledge and expertise.
The number of credit union acquisitions of bank assets and certain liabilities is small relative to any standard. As we continue to see the evolution in the marketplace, one of my priorities as Chairman is to be forward thinking. Credit unions as well as banks have asked for clarity on this process. That is why I have brought this rulemaking before the board today to consider this issue and to add even more transparency to the process.
Since 2012, credit unions have acquired the assets or liabilities of roughly 30 banks. We should recognize that these acquisitions are occurring at a time when options for financial services are dwindling in far too many of our communities. Credit union acquisitions of banks may be particularly beneficial for underserved and rural areas, which have seen a severe contraction in access to financial services over the last decade as financial institutions close branches.
When communities lose access to financial services providers, it’s like cutting off the oxygen to the local economy — small businesses suffer; jobs are lost; and consumers, particularly in low-income households, are more likely to turn to less carefully regulated predatory lenders. If a credit union acquiring a local bank allows for continued access to financial services when those services might otherwise have been lost, then that’s an outcome we should encourage. It is my concern that in instances where credit unions aren’t allowed to make these types of transactions, it leaves a potential void and vulnerability in underserved, rural communities.
When a federal credit union acquires a bank, NCUA requires a two-step process to establish the membership status of the former bank’s customers. First, the federal credit union must confirm the bank customers are within the federal credit union’s field of membership. Second, the former bank’s customers must become full members of the federal credit union (For state-chartered credit unions, the state regulatory agency determines field-of-membership eligibility and credit union membership.).
In considering the rule today, the NCUA is taking steps to add even more clarity to the acquisition process.
I want to highlight a few provisions of the proposed rule that demonstrate how it meets the efficient, transparent regulatory framework the NCUA’s strategic plan envisions.
First, the rule provides more information about what the NCUA needs in order to fulfill our statutory mandate to approve or disapprove these transactions.
Second, the rule lists the circumstances under which deposits qualify for share insurance through the National Credit Union Share Insurance Fund and explains the process for making customers of other types of financial institutions members of federal credit unions.
Third, the proposed rule also amends section 741.8 to include cross references, so that it is clear which NCUA rules apply to which transactions. Again, these are not new requirements, but continue the NCUA’s efforts to make our regulations as clear and transparent as possible, something that is a top priority under my chairmanship.
Finally, the proposed rule incorporates the statutory factors the Federal Credit Union Act requires the NCUA to consider in approving or denying proposed transactions. Restating these factors in the regulation increases stakeholder awareness of them.
The transactions the proposed rule addresses represent our free and open market system at work, and the Federal Credit Union Act specifically authorizes them, with NCUA oversight. I believe the proposed rule provides some much-needed clarity about that oversight process, without imposing undue burdens.