Credit Unions – Are Your Bank Acquisition’s Vendors Safe?

Credit unions are buying small banks in larger numbers than ever before. “Credit unions have acquired 21 U.S. banks since 2018, according to S&P Global Market Intelligence, compared with 12 purchases in the prior five years,” says Lalita Clozel of the Wall Street Journal.

This emerging trend has received backlash. The banking industry believes credit unions are becoming too aggressive. Because credit unions have a not-for-profit business model, they benefit from a federal tax exemption. Consequently, NCUA Chairman Rodney Hood wants to introduce a rule to clarify credit unions’ regulatory responsibilities when acquiring banks by the end of 2019.

It’s understandable that a credit union would want to continue growing. There’s more to worry about, however, than just scrutiny from other financial institutes and regulators. When you acquire a business, you also become liable for their vendors. You need to implement or strengthen a vendor risk management (VRM) program in order to truly benefit from an acquisition.


Evaluate an Acquisition Target’s Vendors with Due Diligence

 There are many advantages to credit unions acquiring banks. Small banks often have strong community ties. These banks have different specialties than credit unions, such as business lending. You gain new connections and bank talent who have unique capabilities. But beware — with great benefits comes great risk.

Credit Unions need to conduct due diligence on a financial institution and their vendors before moving forward on an acquisition. Ascertain the complete value of the target company, their risk culture and relationships with their vendors.

Don’t inherit problematic vendors. At the same time, some contracts can’t be broken. Investigate what risks you’re acquiring by evaluating these vendors’:

  • Limitations
  • Data and information security
  • Management practices
  • Obligations
  • Hidden costs and liabilities
  • Contractual demands
  • Reputation
  • BCP/DR preparedness
  • Compliance requirements

Weigh an acquisition’s possible bottom line against the inherent risk of their existing vendors. Gain this insight with a robust, complete and configurable VRM system.


VendorInsight® Gives You Confidence and Protection

VendorInsight® has the necessary scalability and automation to support rapid growth and smooth acquisition efforts. The VRM solution includes experienced analysts and the most up-to-date software for an evolving and expanding regulatory landscape.

VendorInsight® utilizes vendor due diligence analyst reports to meet customer complaints and social media monitoring requirements. The mature, full-featured software also uses best-practice templates, vendor onboarding questionnaires and checklists. You’ll be able to manage the regulatory scrutiny and increasing complexity that accompanies an acquisition’s third- and even fourth-party vendors.

VendorInsight® gives your financial institution the confidence and protection you need when expanding your core business.  


Learn More

You must be mindful of everything that comes with an acquisition — including their vendors. Don’t be saddled with unexpected legal, financial or regulatory predicaments.

Conduct the appropriate due diligence if you’re considering an acquisition. Request a demo today to learn how VendorInsight® can perform comprehensive due diligence reviews of a target acquisition and its vendors, so you don’t have to!

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