Fed Governor: Include Credit Union Competition in Bank Merger Tests

Credit unions have become significant competitors with banks and their presence should be a part of any bank merger evaluation, Federal Reserve Governor Michelle Bowman said last week.

“Credit unions whose field-of-membership includes all, or almost all, of the market populations, whose branches are easily accessible to the public, who engage in a significant amount of commercial lending and who have staff available for small business services, or who have acquired a community bank should be part of any initial competitive screen,” Bowman said, in a speech at the Community Banking Research Conference, sponsored by the Federal Reserve, the Conference of State Bank Supervisors and the FDIC.

Federal banking regulators and the Justice Department have been reviewing bank merger guidelines as part of President Biden’s efforts to increase competition in several industries. Those guidelines have not been updated since 1995, Bowman noted.

Banking trade groups have been pushing federal officials to take a closer look at bank purchases by credit unions, but the NCUA is not part of the merger process review by the banking regulators.

The bankers have been particularly incensed about those purchases, charging that credit unions are leveraging their tax-exempt status to acquire banks.

Bowman acknowledged those purchases; however, she did not call for increased scrutiny of them.

“Underscoring just how much credit unions are competing directly with banks, particularly community banks, is the recent increase in acquisitions of community banks by credit unions,” she stated. But she did not go further than that.

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Related: Fed Governor Urges Focus on Credit Union Deposits in M&A Review