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Credit unions’ acquisitions of banks and thrifts

Credit unions’ acquisitions of banks and thrifts In total, 14 credit unions have acquired 16 banks and savings institutions since 2012; 7 additional acquisitions are in progress and are expected to close before year-end 2019. The analysis of the population of these acquisitions spans the paths of annual differences in CAMEL ratios. Most acquirers have a somewhat revised capital structure and are often benefiting from economies of scope, as well as economies of scale. Since their acquisitions, the acquiring credit unions have become less risky, measured by simulated CAMEL ratios, and they are lending a larger share of their deposits. There is no apparent financial reason to discourage credit unions from acquiring additional banks and savings institutions. The National Credit Union Administration does not need to be particularly hesitant to allow credit unions to acquire banks and thrifts.Design/methodology/approachFinancial analysis is done via simulated CAMEL ratios.FindingsAfter acquiring banks, credit unions are less risky and lend a greater share of their deposits.Research limitations/implicationsThe study analyzes the population of the credit unions that have acquired banks since 2012, but the population consists of 14 banks acquiring 16 credit unions.Practical implicationsCredit unions should not be prohibited from further acquisitions of banks and thrifts.Social implicationsCredit union members are better served after a credit union acquires a bank.Originality/valueNo previous study has explored the effects of credit unions acquiring banks and thrifts, which began in 2012. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economic Policy Emerald Publishing

Credit unions’ acquisitions of banks and thrifts

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1757-6385
DOI
10.1108/jfep-05-2018-0077
Publisher site
See Article on Publisher Site

Abstract

In total, 14 credit unions have acquired 16 banks and savings institutions since 2012; 7 additional acquisitions are in progress and are expected to close before year-end 2019. The analysis of the population of these acquisitions spans the paths of annual differences in CAMEL ratios. Most acquirers have a somewhat revised capital structure and are often benefiting from economies of scope, as well as economies of scale. Since their acquisitions, the acquiring credit unions have become less risky, measured by simulated CAMEL ratios, and they are lending a larger share of their deposits. There is no apparent financial reason to discourage credit unions from acquiring additional banks and savings institutions. The National Credit Union Administration does not need to be particularly hesitant to allow credit unions to acquire banks and thrifts.Design/methodology/approachFinancial analysis is done via simulated CAMEL ratios.FindingsAfter acquiring banks, credit unions are less risky and lend a greater share of their deposits.Research limitations/implicationsThe study analyzes the population of the credit unions that have acquired banks since 2012, but the population consists of 14 banks acquiring 16 credit unions.Practical implicationsCredit unions should not be prohibited from further acquisitions of banks and thrifts.Social implicationsCredit union members are better served after a credit union acquires a bank.Originality/valueNo previous study has explored the effects of credit unions acquiring banks and thrifts, which began in 2012.

Journal

Journal of Financial Economic PolicyEmerald Publishing

Published: Aug 6, 2019

Keywords: Banks; Financial economics; Acquisitions; G20; G21

References