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As the NCUA considers ways to improve its rules related to combination transactions, NAFCU Director of Regulatory Affairs Ann Kossachev encouraged an expeditious timeline for approval and suggested a careful review of its existing requirements for merger transactions to streamline the process.                            

The NCUA issued the proposed rule in January, which would create a new Subpart D of Part 708a with regulations to clarify and make transparent the procedures and requirements currently in place with regard to combination transactions. 

A combination transaction includes a credit union seeking to assume liabilities, merge, or consolidate with other financial institutions. In the letter, Kossachev noted that these transactions “overwhelmingly benefit local communities that may lose community-focused financial services as well as jobs and access to branches if, instead, a national bank purchases the local community bank.”

Kossachev shared NAFCU's objection to any rigid field of membership (FOM) requirements that could impose unnecessary burdens on the process of a bank selling to a credit union and could hinder a credit unions ability to serve underserved communities.

“NAFCU appreciates the NCUA’s efforts to provide transparency for transactions where a credit union merges, consolidates, or assumes the liabilities of a bank. NAFCU urges the NCUA to streamline and offer a clear timeline for the approval of such transactions as well as provide greater flexibility for FOM requirements both under this proposed rule and more broadly in its regulations,” Kossachev explained. “Such flexibility would afford credit unions opportunities to better serve underserved communities by keeping branches open and offering access to safe, affordable financial products and services.”

To encourage a quick timeline of approval, Kossachev outlined two possible steps to streamline the NCUA’s application process, including:

• the adoption of a 30-calendar day notification timeline to acknowledge receipt of a credit union’s application, providing credit unions and the bank transaction partner with certainty that the NCUA’s review of the application is ongoing; and
• the adoption of a six-month timeline for review and approval of applications, with the potential for several one-month extensions to allow sufficient time for credit unions to collect important financial documents and other information required.

“A timeline for the NCUA to complete its review of the application and either approve or deny the transaction would keep all parties accountable,” suggested Kossachev.

However, Kossachev noted that NAFCU recognizes all combination transactions are not the same, and each transaction may face different obstacles and require different timelines. She encouraged the NCUA to keep this in mind as well and suggested that “bright-line requirements are not appropriate; however, clear guidelines and expectations for the process are essential.”

In addition, Kossachev requested clarification on how the proposed section will interact with existing regulations about the purchase and assumption of liabilities, and if these changes will affect transactions that are currently being processed by the NCUA.

As the topic of mergers between credit unions and banks has been prevalent in the last year, NCUA Board Chairman Rodney Hood indicated that the agency would clarify credit unions' regulatory responsibilities when acquiring banks. NAFCU has worked tirelessly to educate lawmakers, administration officials, and the public on the facts of these mergers.

Read Kossachev's full letter here.