Community Bankers Flock to Capital Touting Anti-Credit Union Message

Main talking points at annual conference include tax exemption, bank acquisitions and NCUA oversight.

The nation’s community bankers are descending on Washington, D.C. this week and are singing a familiar song—that credit unions no longer deserve the tax exemption they were awarded by Congress.

“Today, the industry is dominated by multi-billion-dollar institutions, national in scope, with broad commercial-lending powers and no effective check on their fields of membership,” the Independent Community Bankers of America said, in providing those attending its annual Capital Summit with talking points the trade group wants bankers to discuss with lawmakers this week.

It’s an annual ritual that was adjusted during the pandemic, but is now back in full force.

Context

Credit union trade groups hold similar conferences; CUNA’s Governmental Affairs Conference was held this winter and NAFCU’s Congressional Caucus is scheduled for September.

This week, it’s the community bankers’ turn.

And for the 2023 edition, the bankers are armed with a survey commissioned by the ICBA showing that 72% of 11,020 people polled in February considered it important that their financial institution be located in their local community. The data released does not differentiate between the types of financial institutions.

Bank Acquisitions

In encouraging their members to push an anti-credit union agenda, the ICBA is urging them to ask their lawmakers to support taxation of credit-union bank acquisitions.

“A decade ago, there were only two to three such deals a year. In 2022, there were 15, and there is every indication that the trend will continue to strengthen,” the ICBA said. “These deals erode the tax base as taxable activity in community banks is transformed into tax-exempt activity at credit unions.”

The credit union industry, the banking group added, is now dominated by multi-billion-dollar institutions with broad commercial lending powers and no effective check on their fields of membership.

“Given this transformation, their tax exemption is no longer justified,” the ICBA stated. “There are 426 credit unions with assets of more than $1 billion and 21 credit unions with assets of more than $10 billion, the largest of which has more than $150 billion in assets.”

Criticism of NCUA

And the ICBA singled out the NCUA for becoming “an industry advocate and cheerleader, not a regulator.”

The agency, the bankers said, has “virtually dissolved field of membership limitations that underpin the common bond requirement, adopted loopholes to expand commercial lending powers, and, more recently, given credit unions authority to raise capital through the sale of subordinated debt securities to venture funds and other outside investors, in contradiction to credit unions’ cooperative ownership structure.”

The ICBA and credit union trade groups agree on some other issues. For instance, both oppose changes to the credit card routing mandates and are frustrated by the CFPB’s final rule that requires financial institutions to report their lending to women- and minority-owned small businesses.