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Banks worried by Maryland credit union mergers

According to an article published in the Washington Business Journal, banks are becoming increasingly concerned about the size and power of credit unions, especially after they consolidate. The recent merger between two of Maryland's largest credit unions, SECU Credit Union and MECU, together estimated to be worth about $3.5 billion, is just one example of the growing trends of credit union foreclosures that have allowed that institutions to compete with traditionally dominate banks.

SECU's new plan to acquire the Anne Arundel County Employee's Federal Credit Union, worth about $82.4 million, has drawn concern from banks. However, SECU's CEO is not sure why his organization's Business acquisitions would have banks alarmed. He explained, "I can't really speak to why banks may or may not be concerned with mergers happening in the credit union industry right now, but I can saw we have seen an overwhelmingly positive response from members within the Anne Arundel Employee's Federal Credit Union and SECU, specifically, regarding our proposed merger."

The CEO of the Maryland Bankers Association argued that credit unions should not be allowed to expand themselves significantly through mergers, contending that such growth contradicts their "original roots." She says credit unions that pursue multiple mergers should have to convert to banks and lose their tax exempt status. "The more they expand and act like Federal Deposit Insurance Corp.-insured banks, they should convert to banks," she explained.

SECU's CEO defended his firm's actions, saying that SECU's primary priority remains the interests of its members. Noting that credit unions represent just 8 percent of market share against banks, he explained, "Our motivations are different than that of banks. Our business model is predicated on serving members, not the profit margin. And since we continue to grow, we must be doing something right."

Officials with other credit unions agree that banks should not feel threatened. An executive with Bellwood Federal Credit Union argued that institutions like his "are not going to make a dent against banks like Wells Fargo."

Source: Credit Unions Online, "Banker's Concerns Increase With Credit Union Mergers," Gina Ragusa, April 23, 2012

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