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Washington, D.C. (May 31, 2024) — Independent Community Bankers of America (ICBA) President and CEO Rebeca Romero Rainey issued the following statement after the latest acquisition of a tax-paying bank by a tax-exempt credit union.
“The latest community bank acquisition by a tax-exempt credit union — the 11th already in 2024 — illustrates much of what is wrong with U.S. financial services regulation. The dangerous trend of tax-exempt credit unions buying banks expands the federal tax exemption for more than $2 trillion in credit union assets, displaces trusted providers of credit in local communities, and demonstrates the urgency of addressing the burdensome regulatory environment.
“The loss of community banks to tax-advantaged credit unions clearly shows the harmful and irreversible impact of the excessively burdensome regulatory environment that only continues to grow, with a rash of rulemakings adding 7,000 pages of new rules since July and driving industry consolidation. Further, the sluggish merger approval processes of federal banking regulators constrain bank-to-bank deals, while National Credit Union Administration’s bureaucratic obstacles and roadblocks to credit union conversions and mergers make it more difficult for a bank to acquire a credit union than vice versa.
“Ultimately, Congress must act on this dangerous trend, which accounts for roughly a quarter of this year’s banking industry acquisitions. While states such as Tennessee, Colorado, Minnesota, Mississippi, and Nebraska have acted to restrict these deals, Congress should respond in kind to this national issue. ICBA and community bankers continue calling on Congress to hold hearings, request a Government Accountability Office study on the credit union industry, and consider an ‘exit fee’ on these acquisitions to capture the value of the tax revenue lost once the acquired bank’s business activity becomes tax-exempt.
“ICBA polling conducted by Morning Consult shows Americans support a congressional review of credit union policy, including the industry’s tax and Community Reinvestment Act exemptions. Lawmakers have not only constituents on their side, but also history. In 1951, Congress revoked the tax exemption for building and loan associations, cooperative banks, and mutual savings banks, finding that these institutions operated much like commercial banks and should be taxed accordingly.
“With community banks leading the way in serving small businesses and agricultural lenders, Congress should similarly investigate the nation’s outdated credit union policies and whether the government should continue subsidizing acquisitions of local, taxpaying community banks.”
About ICBA
The Independent Community Bankers of America® has one mission: to create and promote an environment where community banks flourish. We power the potential of the nation’s community banks through effective advocacy, education, and innovation.
As local and trusted sources of credit, America’s community banks leverage their relationship-based business model and innovative offerings to channel deposits into the neighborhoods they serve, creating jobs, fostering economic prosperity, and fueling their customers’ financial goals and dreams. For more information, visit ICBA’s website at icba.org.