Credit Union Mergers: Trade Group Wants Explanation
NAFCU Calls for More Transparency in Merger Process for Failed CU's The National Association of Federal Credit Unions (NAFCU) sent a letter this week to Deborah Matz, chair of the National Credit Union Administration (NCUA), and the NCUA board members, asking for an explanation of how the agency chooses which credit unions will acquire failed institutions."The selection process has been an issue we've discussed with NCUA for several years," says NAFCU's senior counsel, Carrie Hunt. "There is a natural push-pull in terms of acting quickly, but we'd like to see more transparency in the selection process the NCUA goes through -- something similar to what the FDIC has set up for its mergers and acquisitions."
She points to last week's acquisition of a failed credit union in California by a North Carolina credit union as one example of acquisitions needing more explanation, because of the wide geographic distance between the two institutions.
There have been situations in the past where the agency had to move quickly, Hunt acknowledges. "But we're still flummoxed at some of the pairings," she says. She sees the trend of more credit union failures continuing, "If our economic conditions remain the same, I don't see anything improving." Much of that improvement rests on the amounts of assessment increases that the NCUA proposed in its November board meeting. Basis points could range anywhere from 15 to 40 points, including the shared insurance fund increases, Hunt notes, which will place an additional burden on many credit unions.
In the letter, NAFCU President Fred Becker says many credit unions remain considerably confused and frustrated with the NCUA's current selection process for merger partners. "While NAFCU understands that NCUA must, in many cases, act quickly to find a suitable merger partner for a troubled credit union in order to protect the share insurance fund, many of our members have expressed dissatisfaction with some of the mergers that have resulted over the past year," Becker states.
NAFCU strongly encouraged the NCUA to issue a proposed rule detailing standardized agency merger procedures and timelines that prospective merger partners can follow as they seek to assist the ailing credit unions.
Credit unions are being left out of "fair and equitable" consideration as merger partners because of the lack of standardized agency procedures for mergers, says Becker.
NAFCU says potential merger partners should be given the opportunity to provide a final, written statement outlining their case for the merger. "At the very least, the agency should provide some sort of written explanation detailing the primary reasons for its decision," Becker states. "Simply making the process more transparent would do much to alleviate the concerns NAFCU has heard from its members."