FDIC 'Looking At' Credit Union Purchases of Banks as Hood Defends Deals

The FDIC is “looking at” the implications of credit unions purchasing banks, FDIC Chairwoman Jelena McWilliams said Wednesday, indicating that credit unions may have an advantage because of their tax structure and absence of Community Reinvestment Act enforcement.

“The playing field may not be exactly level,” McWilliams said, at a House Financial Services Committee that featured prudential regulators.

She did not elaborate on her agency’s efforts.

Asked about the same issue, NCUA Chairman Rodney Hood declared, “These are voluntary market-based transactions.”

He added that such transactions must be approved by the NCUA and the FDIC.

“If it weren’t credit unions acquiring some of these banks, the community would be left without a financial institution,” Hood said.

In the past, Hood has said that the NCUA board would be considering rules governing such deals.

Rep. Blaine Luetkemeyer (R-Mo.) said he is worried about such purchases.

“I’m fearful of a war breaking out,” he said.

McWilliams said that there is consolidation in the community bank sector, adding, “I’m concerned about communities losing their banking presence.”

Hood disagreed with the suggestion made by Rep. Steve Stivers (R-Ohio), who said that perhaps large credit unions should be subject to the Community Reinvestment Act.

Hood said that the requirements in the CRA that financial institutions serve their communities is part of the credit union system’s mission.

“Credit unions don’t need government fiats to do the right thing,” he said.

Hood resisted suggestions by Rep. Alexandria Ocasio-Cortez (D-N.Y.) that the NCUA reduce the principal of loans made to taxicab drivers in New York City.

Ocasio-Cortez cited an agency Inspector General’s report that found that the agency failed to act on problems found at New York credit unions with high concentration of taxi-related loans.

She said many of those loans now are being sold to debt collectors at a discount, but the amount owed by the borrowers is not being decreased.

Hood said he sympathizes with taxi drivers, adding that the agency is attempting to work with the drivers who are having trouble repaying their loans.

However, he said he could not commit to decreasing the loan principal, since he is charged with protecting the Share Insurance Fund.

Hood also said that the credit union system is well-capitalized, saying that the agency can continue to study the issue of risk-based capital.

Hood told the committee that the NCUA is providing training to examiners to take into account changes to federal law that legalized hemp. The NCUA has issued preliminary guidance on how credit unions may serve hemp-related businesses.

He said that the NCUA will be hosting a series of roundtables on the issue.

Hood also noted that the NCUA will hold Diversity, Equity and Inclusion summits across the country during the next few years, and invited House committee members to attend those meetings.

The NCUA recently held its first summit in Alexandria, Va.

Hood also is scheduled to testify at a Senate Banking Committee hearing on Thursday.