The Congressional Solution

Conversion Solves Systemic Credit Union Problems

Throughout the credit union system, leaders are daily acknowledging that systemic problems are present; executives that move to a more supportive charter are doing something about it. Congress recognized that HR-1151 put handcuffs on credit unions and provided relief by making it legal and easy to convert to a bank. Thus, the Congressional solution for lack of capital options, loan limits, or other noncompetitive credit union limitations is not new legislation, it's conversion to a bank charter.

Higher capital requirements than banks, PCA, and the inability to access the capital markets are causing competitive problems for progressive credit unions. For most, stopping growth is not a sound strategy. In addition, investment portfolios and loan concentrations perfectly acceptable for banks are being criticized or are illegal for credit unions. Community minded credit unions are finding that many consumers, business owners, non-profits, and municipalities lack confidence in, misunderstand, or are prohibited from banking at a credit union. Limitations on mergers, limitations on corporate structure innovations, and yes - director compensation prohibitions can have negative ramifications for dynamic institutions.

The solution is not to give up and find a new job but rather to find a charter that supports the survival of the institution. With the help of CU Financial Services, some credit unions are seizing the opportunity to remove the significant impediments addressed by these credit union leaders. The long term solution to impediments imposed by poor credit union awareness and restrictive regulation is conversion to a bank charter. CU Financial Services helps your credit union get the facts about this dynamic opportunity.


Converting to a Mutual Savings Bank

Credit unions convert to a bank charter because of pain or opportunity. Capital issues, product limits, and poor consumer awareness create pain. Expanding service to a growing community, filling voids left by banks and credit unions, and maximizing personnel and infrastructure potential provide opportunities.

Conversion applicants correctly reason that the credit union's members and the future growth of the institution requires an unrestricted customer base and expanded products that will include an increased emphasis on real estate lending and business lending. The federal mutual bank charter encourages both and offers capital and corporate structure advantages. Some also convert to remove marketing impediments related to the credit union charter and to avoid the public relations and political risks of staying in the credit union system.