Magazine article American Banker

NCUA Becoming Compass for Industry

Magazine article American Banker

NCUA Becoming Compass for Industry

Article excerpt

Its handling of the proposed merger between two large West Coast credit unions, which died March 3, has established the National Credit Union Administration as the arbiter of the industry's direction.

There were never any safety-and-soundness concerns involved in the proposed marriage between Patelco Credit Union and First Technology Federal Credit Union, both of which are considered strong and healthy institutions.

Instead, the agency addressed how the merger would affect service to members and its competitive impact on other credit unions.

The question before the regulator was, did the merger "provide a demonstrable benefit for the membership or was it growth for growth's sake?" NCUA Chairman Norman E. D'Amours said in an interview last week.

"Growth for growth's sake is to be avoided because it opposes the underpinnings of the credit union movement," he added.

Opponents of the merger came out in an unprecedented open hearing on the transaction on Feb. 14. High on their list of complaints was that the merger would increase competition.

At the hearing Mr. D'Amours questioned whether the merger would have benefited Patelco members, because it would have increased operating expenses and diminished their representation on the board.

The NCUA chairman believes that the agency has a role of ensuring that the industry sticks to the cooperative precepts embodied in the Federal Credit Union Act of 1934. But some in the industry believe the agency should stick to safety-and-soundness issues.

"No one should think that cooperation can be imposed by regulatory action," the Credit Union National Association said in a comment letter it filed regarding the merger.

An angry Edgar F. Callahan, chief executive of Patelco, said his credit union was mistreated.

The board voted to withdraw the merger application on March 3 because it was "totally exhausted and frustrated with the process," he said. …

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