bank rates

Bankers Bite Back At Bank Transfer Day

I’ve got to wonder if the banking industry is starting a smear campaign against customers planning to jump ship for credit unions on Bank Transfer Day.

Dr. Keith Leggett, a senior economist for the American Bankers Association, published a blog post last week that suggests smart credit unions don’t really want them.

“Some credit union trade groups are viewing this event as an opportunity and are reporting a surge in traffic on their credit union locator sites,” Leggett wrote. “But I’m not sure all credit union CEOs share the same outlook.

“Without a profitable means of deploying the potential inflow of funds, this potential movement in deposits from banks to credit unions could become a drag on credit unions as they incur higher cost associated with opening these accounts, face a potential assessment to rebuild the NCUSIF equity ratio, and see their capital (net worth) ratios fall.”

My translation: If all of the 99%-ers planning to move their money to credit unions actually do so, they’re going to increase costs, throw their balance sheets out of whack, and become money-losing customers.

Then there are the financial industry consultants we’ve seen tweeting that: “CreditUnions will lose money on 99%+ of the switchers!”

Or: “Fee sensitive switchers usually have lower balances and narrower relationships.”

Well, duh.

Banks tend to charge people with lower balances and fewer accounts the highest fees.

If you have more than $20,000 on deposit at Bank of America, you don’t have to pay its stupid $5 a month fee to use your debit card.

If you have less than $20,000 on deposit, you do.

So it only stands to reason that they will be the ones most likely to resist against having to pay even more fees.

You can see why I have to wonder if there’s a subtle public relations campaign that considers anyone who refused to pay those fees as a being a bad poor person, bad, bad!

I also asked the Credit Union National Association if the ABA’s analysis is right and they don’t want all of the new members coming their way because they’ll be a “drag on credit unions.”

Pat Keefe, vice president of media outreach, said CUNA has done its own analysis.

“Some 60,000 people signed up on that Bank Transfer Day page,” Keefe says. “Even if all of those people transferred, that wouldn’t have any drag on credit unions at all.”

CUNA went even further and ran the numbers for one million people, then 15 million people.

Only when you get to that 15 million mark – if 15 million people all moved their money around the same time — does the net worth to asset ratio percentage drop to 8.57% – which “as Keith well knows is a well-capitalized mark,” Keefe says.

Indeed, 7% is considered well capitalized.

In the unlikely event that a credit union experienced such a huge influx of new members that it truly couldn’t absorb them, Keith says “they’d refer those folks to another credit union, and they’d probably do with a forced smile because you don’t want to turn new members away.”

Just remember that the ABA execs and all of those financial industry consultants you’ll see on television over the next several weeks work for the big banks.

They’re out to scare and denigrate customers who might be thinking about closing their accounts at those big banks.

The bad guys aren’t the ones standing up for themselves and taking their money to smaller banks or credit unions that will treat them better.

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  1. SeniorSaver said:
    on October 26th at 10:00 am

    I just hope the inflow of money into credit unions doesn’t cause them to start acting like “banks”–lowering rates, imposing fees, etc.

    Back in the day (the Carter Administration), when credit controls were imposed, money market funds created a system of separating “old money” (not subject to charges under the controls) from “new money” (subject to the charges).

    Maybe cus and community banks could do something similar–sticking “new customers” (post-11/5) with lower rates and higher charges, and paying higher rates and waiving charges for “old customers”(pre-11/5).

    I’m joking, of course, but, then again, our current financial markets, under the fearless guidance of Leader Bernanke, give rise to some pretty strange thoughts.

  2. Bill said:
    on October 27th at 09:50 pm

    Lies, Only Lies And nothing but Lies.

    Anybody up for another war for Democracy yet?