Washington, DC – The Coalition for Credit Union Charter Options (CCUCO) is pleased to announce the inclusion of a provision in the 2011 state budget for conversion directly to the mutual savings bank charter by state-chartered Wisconsin credit unions.
Lee Bettis, CCUCO’s Executive Director, explains: “Previously, state-chartered credit unions in Wisconsin that were interested in switching to a bank charter needed to convert first to the federal credit union charter. This ‘two-step’ is a costly, time-consuming process which is unnecessary in almost every other state.”
CCUCO has credit union members in 16 states, including Wisconsin, where the Coalition’s advisors have been supporting the modernization of state conversion rules. By adding this new, direct path to the bank charter as part of a set of updates to its financial regulations, the Wisconsin legislature has brought its state charter into competitive balance with the federal credit union charter. State-chartered credit unions still must follow comprehensive federal rules in order to convert to the mutual savings bank charter, however.
“We acknowledge that the conversion option won’t be of interest to everyone,” Bettis continued. “There is broad disparity among credit unions. For example, the larger ones with more than $500 million in assets represent only 5% of the industry in numbers but manage 65% of industry assets. Primarily, they are the credit unions which are constrained by the charter limitations on branching, business lending, and capital formation which can be alleviated by conversion to a mutual savings bank.”
Charter flexibility is critical at a time when the industry has been rocked by the failure of at least eight large credit unions, creating billions of dollars of loses to the deposit fund. Those failures have forced surviving credit unions to make costly payments to the credit union deposit insurance fund, thus impairing their ability to serve their members and their communities as they have in the past.
“A simple and inexpensive path to conversion deserves to be supported by public policy,” added Bettis. “After conversion to the bank charter, the former not-for-profit credit union will be subject to state and federal income taxes, thus providing a new source of revenues to support the fiscal challenges many states face.”
Yet despite having to pay taxes, the bank charter offers several advantages. Compared to a credit union with an equal amount of net worth a mutual savings bank can
* make more loans,
* accept more deposits, and
* open more branches.
“Hence,” Bettis concluded, “by these measures, a credit union that converts to a mutual savings bank can better serve members and the community.”
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For further information contact:
Coalition for Credit Union Charter Options
1425 K. Street N.W., Suite 350
Washington, DC 20005
About the Coalition
The Coalition for Credit Union Charter Options is an education and advocacy group formed to represent the interests of credit unions seeking to preserve charter choice under reasonable rules and at a reasonable cost. The Coalition promotes and defends the right of credit unions to choose the type of financial services charter and organizational structure that best suits the needs of their customers and the communities they serve.