ANALYSIS: Wisconsin’s Banking Institutions Review Board recently approved a Minnesota credit union’s purchase of a Wisconsin state-chartered bank – and in doing so, helped clear the way for future such credit union acquisitions of banks without review by the Wisconsin DFI’s Division of Banking.
Minnesota-based Wings Financial Credit Union (which is that state’s largest credit union, with more than $8 billion in assets) applied to the Division of Banking back in February for approval to buy Settler’s Bank (of Windsor, Wis., with assets of about $318 million). The Division of Banking approved the deal in May.
The Wisconsin Bankers Association and IncredibleBank (a state-chartered bank based in Wausau, Wis.) immediately appealed that approval decision to the Banking Institutions Review Board (which is akin to Wisconsin’s Credit Union Review Board). That board reviewed legal briefs submitted by the parties and heard oral arguments in late June. They released a written opinion dated June 30. You can read the full opinion here.
The Banking Institutions Review Board rejected the bankers’ arguments against the Wings/Settlers deal. In doing so, the board reached two key conclusions, discussed below.
WBA and IncredibleBank lacked “standing” to challenge the purchase
The first important conclusion the banking board reached is that the WBA and IncredibleBank both lacked legal “standing” to bring their appeal.
Standing is a legal concept that asks whether someone has the type of injury required to bring a matter before a court or agency. In general, standing has two components. As a factual matter, the injury must be a direct injury, and not hypothetical or conjectural. As a legal matter, the grievance must be “cognizable,” meaning that it must be among the types of injury that the underlying statute protects. Neither WBA nor IncredibleBank met the tests for standing, which were established in other cases over the years by the Wisconsin Supreme Court.
The banking board wrote:
WBA’s petition alleges that it is injured because Settlers is currently a member of the WBA, and that any credit union purchaser will not be. … Of course, the Division could not force Settlers to stay in business and certainly not require it to remain a member of WBA’s voluntary organization. More importantly, no Wisconsin statute protects WBA’s interest in maximizing membership in its organization.
IncredibleBank’s petition says it has standing on the theory that it might one day want to acquire Settlers, even if it does not wish to do so now, and that Wings would be a competitor with a special tax status. … IncredibleBank’s loss of opportunity to purchase Settlers is conjectural and hypothetical: it acknowledges it has no current interest in purchasing it. And no statute protects Wisconsin banks from competition by credit unions.
Division of Banking review not needed for CU purchases of banks
The other key conclusion in the banking board’s decision gets a bit technical.
Section 221.0901(3) of the Wisconsin Statutes governs the acquisition of banks by any “company,” and it spells out certain procedures required for state approval of such acquisitions by the Division of Banking. At issue was whether the term “company” includes a credit union.
The Division of Banking at one time said that the statute didn’t include credit unions, but it reconsidered that stance at the WBA’s urging in 2017, concluding that the statute does apply to credit union purchases of banks, several of which it approved over the years. Nevertheless, in the Wings/Settlers deal, the WBA tried to turn back the clock.
The bankers took the position that §221.0901(3) is ambiguous when it comes to whether credit unions can acquire Wisconsin banks. Because of the ambiguity in the statute, they argued, the Division of Banking must prohibit all bank sales to credit unions unless it issues a rule saying such sales are allowed.
The banking board concluded that “there remains an ambiguity about what ‘company’ means,” but that ambiguity led it to a conclusion opposite what the bankers wanted: The banking board wrote that “the Division could not prohibit these transactions without first promulgating a rule. … [I]t is enough to conclude that the Division cannot simply begin treating the transactions as prohibited.”
In other words, the bankers wanted to bar all bank sales to CUs until the Division of Banking issued a rule allowing such sales. The Banking Institutions Review Board decided that the sales could be treated as allowable unless/until the Division of Banking passes a rule that says otherwise. It urged the Division to proceed with rulemaking to address how §221.0901(3) should be applied when the acquiring entity of a bank is a credit union.
In announcing this conclusion, the banking board went a step further, ruling that the Division of Banking didn’t need to review the Wings/Settlers deal in the first place:
The Board concludes that the definition is not so unambiguous that the Division could begin reviewing proposed transactions like the one here without engaging in rulemaking. … [I]t needed to first promulgate a rule.
The proposed transaction here should have proceeded without review by the Division. It is subject to review by other regulatory entities that are not part of this appeal.
This means that future purchases of Wisconsin banks by credit unions may proceed without Division of Banking review – simplifying the process. Of course, future rulemaking by the Division could change that result, and we’ll keep credit unions apprised of any developments in that area.
The WBA and IncredibleBank have 30 days to appeal the Banking Institutions Review Board’s decision to a state circuit court. We’ll alert credit unions if they choose to file that appeal.
With the Wings/Settlers transaction complete, Settlers Bank’s three locations (in Appleton, Madison, and Windsor, Wis.) have already been re-branded as Settlers Best Credit Union, a division of Wings Financial Credit Union, according to the Settlers Bank website.