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CDFI advocate Why CUs dont want to be banks
NEW YORK (6/23/09)--During closing remarks at the National Federation of Community Development Credit Unions' 35th Annual Conference on Serving the Underserved, Ellen Seidman, community development financial institutions (CDFIs) advocate, explained why credit unions don’t want to convert to banks.
Ellen Seidman, community development financial institutions advocate, explained why credit unions don’t want to convert to banks during remarks at the National Federation of Community Development Credit Unions' 35th Annual Conference on Serving the Underserved June 12 in Phoenix. (Photo provided by the National Federation of Community Development Credit Unions)
The federation’s conference took place June 11-13 in Phoenix. “Why do you not want to become a bank?” Seidman said. “Well for one, our banking regulators are increasing their premium assessments across the board; so financially, it might not make a lot of sense. Our regulators are also very tough, especially on the smaller institutions; institutions that don’t tend to fight as well as the larger players, and thus are easier to close. “Another major factor to consider,” Seidman continued, “is that bank insurance premiums are rising, and this generally disadvantages the smaller institutions. We also have higher requirements on capital and return on assets, which are generally much tougher than those of credit unions. Of course there's always the issue of taxation, both as a for profit institution and under CRA [Community Reinvestment Act]. While your institutions would have no issue meeting CRA requirements, why on earth would you want yet another complicated exam to deal with?” Seidman addressed more than 250 community development credit union representatives, credit union organizers, regulators and government officials during her speech. She also discussed the importance of local financial institutions in addressing the current economic environment, and emerging opportunities for CDFIs under the new administration. Seidman acknowledged the challenges that CDFIs and nonprofit institutions nationwide are facing and provided some recommendations to address those challenges and strengthen those institutions, the federation said.
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