Colorado Credit Unions Speak: Giving Banks the Option to Sell to Credit Unions Makes Good Economic Sense

Posted by Britt Bonanzino on April 2, 2024

By Tracie Wilcox, President and CEO, On Tap Credit Union and Mike Williams, President and CEO, Colorado Credit Union

During this legislative session, the Colorado General Assembly would consider a sunset bill (House Bill 1351) for the Division of Banking and the State Banking Board that includes a recommendation from the Department of Regulatory Agencies, or DORA, that the banking code be amended to allow banks to sell their assets to credit unions. In an initial hearing, the House Business Affairs and Labor Committee agreed this makes sense for Coloradans, and the committee voted 7-4 Wednesday in favor of moving it forward.

Lawmakers should support this change, which could benefit Coloradans by allowing more choice in the marketplace and allow more of the selling bank employees to keep their jobs and ensure local financial products and services remain available, especially in rural economies. In the 46 other states where banks can sell their assets to credit unions, the purchasing credit union was more likely than a bank buyer to keep the bank’s local branches open, retain its employees, and maintain a community-focused approach. Those are the primary reasons former CEOs of banks cited as their reasons for selling to credit unions in a survey by America’s Credit Unions.

Colorado’s credit unions serve 36% of the state’s population (2.5 million consumers), and their cooperative structure inherently holds them accountable to their members and their communities. The foundational “people helping people” philosophy is reflected in a strong focus on serving the underserved.

According to the National Credit Union Administration, 40 of the 69 credit unions headquartered in Colorado are designated as Low-Income Credit Unions. This designation increases their access to resources that help them serve financially disadvantaged consumers. Credit unions are committed to putting the needs of their members first and by the very nature of their structure make loans that invest in their communities.

Financial institutions choose to sell some or all of their assets for a variety of reasons. If this bill passes, a bank would decide who they would sell to. They could select a not-for-profit credit union or another bank — they could make that decision based on the price offered, the reputation and connection to the community of the possible buyer, or the likelihood of the buyer to retain their staff and business approach.

If a local bank was to sell to a local credit union with a commercial lending portfolio and expert staff, those attributes are then kept in the community, preventing those resources from going out of state and community jobs being lost. Currently, two-thirds of bank assets are sold to out-of-state banks, according to FDIC and NCUA data analyzed by America’s Credit Unions.

Allowing a bank to sell to a credit union could keep our financial assets in-state. This benefits local businesses and offers the bank’s business customers the opportunity to become member-owners of their not-for-profit credit union. At the end of 2023, Colorado credit unions had $4.9 billion in outstanding commercial loans, which help  fuel the economy. In just 2021, credit unions lent over $201 million to local small- and mid-sized businesses.

As well, banks’ stockholders would benefit from having a larger number of potential buyers. There’s no reason to forbid a bank sale to a credit union if it looks like the best option to the sellers. That said, this is not an overwhelming national trend. Nationwide from 2012 to 2022, 99.4% of all bank assets sold were sold to another bank — a bank has only chosen to sell to a credit union 67 total times, according to FDIC and NCUA analyzed by America’s Credit Unions.

Colorado implemented an official sunset review process, with the specific aim of keeping unnecessary and burdensome regulations in check. Sunset reviews seek to ensure that the least restrictive form of regulation is established, taking into consideration other available regulatory mechanisms.

In this particular case, DORA’s Colorado Office of Policy, Research and Regulatory Reform — a department overseen by Gov. Jared Polis — has determined there is no justification for a blanket ban on bank acquisitions by credit unions, as any proposed transactions would be evaluated and approved by bank and credit union regulators, providing ample protection for the public.

This is a textbook case of an unnecessary barrier to economic activity — one that Colorado lawmakers should move to eliminate.

Tracie Wilcox lives in Arvada and is the president and CEO of Golden-based On Tap Credit Union which serves Boulder, Denver, Jefferson and Larimer counties.

Mike Williams lives in Highlands Ranch and is the president and CEO of Colorado Credit Union, which serves Adams, Douglas, Jefferson, Arapahoe, Weld, Denver, Broomfield and Boulder counties.

This opinion piece was originally published by The Colorado Sun and can be viewed at coloradosun.com.

Posted in Colorado, Colorado Advocacy, In The News, Top Headlines.