Magazine article American Banker

N.Y. Banks Laud Law Easing Credit Union Conversion

Magazine article American Banker

N.Y. Banks Laud Law Easing Credit Union Conversion

Article excerpt

Only one New York credit union has ever converted to a mutual savings bank, but that could change now that Gov. George E. Pataki has signed legislation making it easier for state-chartered credit unions to switch.

The bill, which had the full backing of the state's banking industry, will eliminate the requirement that credit unions obtain the approval of the New York State Banking Department before getting a member vote. The department, which regulates all New York State-chartered financial institutions, had no comment on the law, which Gov. Pataki signed last week and takes effect Jan. 1.

The New York Credit Union League did not support the bill and there is no evidence that its members are clamoring to become banks, according to Michael A. Lanotte, the league's senior vice president and general counsel.

Mr. Lanotte said the bill was spearheaded by banks, which have been increasingly vocal in their opposition to credit unions' expanding fields of membership and growing involvement in business lending.

Michael P. Smith, the president of the New York Bankers Association, said his group was not behind the introduction of the bill but strongly supported it.

"In our view, if a credit union wants to have the powers of a bank, they ought to convert," he said.

Despite the fact that only 21 credit unions nationwide have ever switched to bank charters, conversion has emerged as a contentious issue.

Credit union trade groups, the National Credit Union Administration, and a number of state regulators object to the practice because it weakens their industry while strengthening banks.

Bankers, not surprisingly, encourage it because every credit union that converts means one less tax-exempt competitor.

Just three weeks ago, the NCUA, which regulates federally chartered credit unions, approved a rule that toughens the disclosures they must make to members before taking a conversion vote. …

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