NCUA’s regulations stymie credit union mergers into banks

Over the last couple of years, I have reported on credit unions acquiring banks. While such mergers remain rare, these mergers are more frequent now than just several years ago.

However, these mergers appear to be a one way street — banks merging into credit unions, not credit unions merging into banks.

What is keeping these mergers from being a two way street is the National Credit Union Administration’s rules governing the merger of a credit union into a bank (Section 708a SubPart C).

The National Credit Union Administration (NCUA) requires the credit union board to either “conduct a well-publicized merger auction and obtain purchase quotations from at least three banks, two or more of which must be stock banks; or retain a qualified appraisal entity to analyze and estimate the merger value of the credit union.”

If the board decides against an auction, the board needs to publish a notice on why the board is considering the merger and the major positive and negative effects of the proposed merger. The notice should also include information on where members can send comments on the proposed merger.

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