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At the NASCUS State System Summit, August 9-11, 2007 in Fort Lauderdale, Florida, credit union system leaders discussed the challenging issues facing credit unions and collaborated on plans for the future. The event featured a diverse line-up of speakers including state and federal regulators, credit union executives, finance and economy experts, government officials and industry specialists.
“The 2007 NASCUS State System Summit was a valuable opportunity for critical discussion on the future of credit unions as well as the daily regulatory and operational challenges,” said NASCUS President and CEO Mary Martha Fortney. “We look forward to continuing the productive dialogue and interaction at future Summits and NASCUS events.”
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Hyland, Parsons and Likens Provide Various Perspectives on Regulatory and Operational Topics, August 9
National Credit Union Administration Board member and NASCUS liaison Gigi Hyland discussed insights on regulatory and legislative issues impacting credit union operations and service. She focused her remarks on the NCUA Outreach Task Force’s efforts. While NCUA is not releasing any findings until after the series is complete, she indicated that some themes have emerged. “One of the themes from the Task Force meetings is the issue of aligning what happens on a policy level with examination practices in the field,” said Hyland. She also covered recent NCUA proposals on merger compensation, bylaws and chartering manual updates.
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| Dr. Jim Likens discusses challenges to the credit union balance sheet, August 9. |
D. Scott Parsons, former U.S. Treasury Deputy Assistant Secretary, emphasized the critical partnership between the private and public financial sectors in disaster preparedness and recovery. In his role at the U.S. Treasury’s Office of Critical Infrastructure Protection and Compliance Policy, Parsons was responsible for protecting the critical physical and cyber infrastructures of the financial services sector. “Credit unions must exceed lower-level resilience expectations and drive preparedness into the focus of the organization,” said Parsons. “We need to foster and further develop public and private partnerships to help plan, prepare for and react to disaster.” Parsons also addressed the NASCUS Regulators session on August 10.
Dr. Jim Likens, dean of Western CUNA Management School and professor at Pomona College, provided an insightful look at credit union balance sheets and challenges to credit union growth. He highlighted the need for improvement in credit union marketing strategies to attract new members and promote growth. “Credit unions can’t grow and thrive without new members,” remarked Likens. He also said small “credit unions are not doomed” but need a good field of membership, staff and board of directors to succeed in today’s marketplace.
Time and Need for Credit Union Capital Reform? August 11
On August 11, three capital experts led a powerful discussion on the issue of credit union capital reform. Bob Hoel, Filene Fellow, Filene Research Institute said that “by and large the credit union movement is overcapitalized” and that if credit unions continue to rely only on retained earnings, there will be serious consequences to credit union growth. “Credit unions are less risky than banks, but credit unions are required to have more capital. This is strange,” said Hoel. “If credit unions can only have capital through retained earnings, we will have no new credit unions.”
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| Bob Hoel addresses Summit attendees on captial reform, August 11. |
Dr. William Jackson, Professor of Finance and Management at the University of Alabama, added that excess capital in credit unions is a systemic problem. “We can do better, we can do much better,” said Jackson. “Deregulation in this area will make credit unions more competitive.” Larry Fazio, NCUA Deputy Director, Office of Examination & Insurance, provided an overview of NCUA’s Prompt Corrective Action (PCA) Reform Proposal and expressed that capital reform is a priority for NCUA Chairman JoAnn Johnson. Fazio indicated the NCUA is willing to discuss secondary or alternative forms of capital for credit unions, but NCUA’s authority in this area is limited.
Growth, Regulatory Burden, Capital and Membership Keep State Credit Union Leaders Up at Night, August 11
Elected leaders of NASCUS, the Credit Union National Association (CUNA), the American Association of Credit Union Leagues (AACUL) and the National Association of Federal Credit Unions (NAFCU) presented Summit attendees with their perspectives on the role of credit unions in the future of American financial services. NASCUS Chairman George Reynolds (GA) commented that credit unions are in a safe and sound condition but that credit unions are in a “service delivery paradigm” due to “hyper competition in the marketplace.” While Reynolds recognized the importance of credit unions’ consumer focus, he cautioned against regulatory remedies in this area because of their potential impact on credit quality.
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| New NASCUS Chairman George Reynolds (GA) particpates in Summit sessions. |
Mendell Thompson, NASCUS Credit Union Advisory Council Chairman and president of America’s Christian Credit Union, CA, stated that preemption of states’ rights and access to capital are his primary concerns. He stressed that charter choice and continued member focus will enable credit unions to “thrive and find a niche to really serve members.” Alan Kemp McMorris, CUNA Chairman and president of Oakland County Credit Union, MI, focused on the need for membership growth in the youth and underserved markets. Financial literacy and legislative and regulatory advocacy are critical, McMorris commented.
AACUL Chairman Rick Pillow, president of the Virginia Credit Union League, highlighted the significance of speaking with one voice on legislative matters. “We can’t send mixed messages,” said Pillow. He pointed to regulatory relief, education and industry cooperation as key elements to continued success for credit unions. John Tippets, NAFCU Board member and president of American Airlines Credit Union, TX, stressed that credit unions will continue to thrive if they remain committed to the not-for-profit business model and take advantage of field of membership opportunities. Tippets noted that his biggest concern looking into the future is the diminishing ability of credit union members to pay their loans. Larry Blanchard, Senior Vice President of Corporate and Legislative Affairs, CUNA Mutual Group, moderated this panel discussion. He also led a session during the Summit on the latest unrelated business income tax (UBIT) updates.
NASCUS also conducted its annual Interagency Dialogue with state regulators and NCUA senior staff, numerous breakouts, educational and networking sessions. Additional Summit speakers included:
• Bruce Jolly, NASCUS General Counsel and partner with Venable, LLP, on legal challenges and issues facing the state and federal systems.
• Cliff Rosenthal, Executive Director, National Federation of Community Development Credit Unions (NFCDCU), on growth and survival strategies for small credit unions.
•Roland A. Arteaga, president, Defense Credit Union Council, on the Talent Amendment and the Defense Department’s consumer lending regulations for military.
• Tim Kovac, CUNA Mutual Group, on the potential impact of proposed changes to Regulation Z.
August 21-23, 2008
Seattle, Washington
Westin Seattle
Pre-register here!
Make plans now to join us at the Westin Seattle for the 2008 NASCUS State System Summit!
Who should attend? State regulators, deputies, senior examiners, credit union CEOs, VPs and CU directors, league executives, federal regulators and executive management.
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Click here to view captions
All photography by Jim Payette
More photos and news wil be featured in the next issue of NASCUS Stateline!
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