NCUA Board Reaffirms Bank Purchase Rules, Imposes No New Roadblocks

With members scoffing at banker concerns about credit unions purchasing banks, the NCUA board on Thursday attempted to clarify the sales process but did not propose new roadblocks to it.

Board member J. Mark McWatters said bankers seem to contend that credit unions are gobbling up banks “like a game of financial Pac-Man.”

He added, “I must admit that the endless Hatfield-McCoy carping between credit unions and community banks has grown tiresome.”

Board member Todd Harper said the banker assertions that credit unions have an advantage over banks because of their tax status are “misguided at best and misleading at worst.”

The Independent Community Bankers of America has focused much of its “Wake Up” anti-credit union campaign on credit unions purchasing banks.

“Credit unions, as well as banks, have requested clarity to this process,” Board Chairman Rodney Hood said Thursday. He added, however, “These are not new requirements.”

The proposed rule attempts to make the process clearer. It states that all such transactions require NCUA approval, and state-chartered, federally-insured credit unions must have state regulatory approval.

The proposal states that the NCUA has the power to consider a proposed transaction’s effect on credit union members and whether the purchase is in keeping with the credit union’s mission.

“Accordingly, the NCUA reserves the right to object to a transaction, or portions of a transaction, even absent safety and soundness concerns,” the agency said.

And the plan does not impose a limit on the length of time the agency may take to review such transactions.

In addition, a federally-insured credit union combining with a bank must show how it plans to make bank customers credit union members.

Harper again mentioned his desire to increase NCUA consumer protection enforcement, adding that the FDIC has such enforcement.

The agency board also agreed to publish a proposed rule allowing certain credit unions to issue subordinated debt.

The proposed rule expands eligibility to issue Subordinated Debt to include non-low-income credit unions, complex credit unions and new credit unions.

Credit unions have long pushed for subordinated debt rules, while the banking industry has argued that credit unions should not be permitted to have alternative types of capital.

The NCUA board last year once again delayed the agency’s Risk-Based Capital rule, as Hood said he wanted to consider the entire capital issue, including subordinated debt.

The three board members approved the proposal, which will be open for comment for 120 days after it is published in the Federal Register.

Hood and Harper applauded McWatters for having pushed for the rule for six years.

The board also reaffirmed its temporary maximum interest rate of 18% for most loans.

The board is required to re-adopt any interest rate exceeding 15%; the board extended the 18% for an additional 18 months. The interest rate vote also allowed the continuation of the agency’s Payday Alternative Loan program, which has a 28% maximum interest rate.

Hood said the loan rate has stood at 18% since 1987.

He said the agency’s NCUA regulatory agenda included a possible variable interest rate rule. He said that rule was set aside while the board addressed other issues. Hood remains open to considering such a proposal.

The panel also adopted the agency’s annual performance report.