Letter on Acquisitions Using Subordinated Debt

ICBA called on the National Credit Union Administration to bar tax-exempt credit unions from using funds raised from Wall Street investors to finance acquisitions of tax-paying community banks.

In its letter to the NCUA, ICBA said the agency should curb the abuse of its subordinated debt rule, which allows credit unions to use their tax exemption to raise money from private equity firms to acquire community banks. This means credit unions are selling ownership interests in their credit unions to nonmember investors, not their traditional member-owners.