A Bold and Unflinching State Credit Union System

A special message from Lucy Ito, President and CEO
November 2014

Let me open my first President’s Message by applauding Mary Martha Fortney for her leadership as NASCUS CEO for the last 11 years and her dedication to the state-chartered credit union system for the past 22 years. Thanks to Mary Martha, the NASCUS Accreditation Program grew and matured to its current coverage of 26 state agencies supervising 85% of all state-chartered credit union assets. During Mary Martha’s tenure, the broader credit union system—state and federal charters alike—benefited from NASCUS’ visionary leadership on critical industry issues such as supplemental capital and unrelated business income tax (UBIT). Most recently, NASCUS has helped advance the broader credit union system through its comments on NCUA’s risk-based capital proposed rule and through NASCUS’ timely coordination of this month’s first-ever Credit Union Cyber Security Symposium. Thank you, Mary Martha, for building such a solid foundation for America’s state-chartered credit union system and positioning us for the future.

Looking forward, the American credit union system—credit unions and regulators included—is at a strategic crossroads. The Great Recession behind us, we know that (a) credit unions did not cause the global financial crisis, (b) credit unions weathered the financial and economic fallout better than banks as a whole, and (c) consumers fared better than they would have otherwise because credit unions were present in the marketplace.  

Despite these demonstrated “wins,” the federal credit union regulatory regime is contemplating a risk-based capital rule that has the potential of compromising the future growth and competitiveness of credit unions. As originally drafted, NCUA's risk-based capital rule proposal places credit unions at a clear competitive disadvantage relative to banks. The ultimate unintended consequence of the proposed rule is that consumers will lose. Fortunately, NCUA has announced that it will solicit a second round of comments on a revised RBC rule.

Lest we forget, the most fundamental core responsibility of both state and federal credit union regulators is to American consumers. The Federal Credit Union Act was enacted and reconfirmed by Congress to assure that the American financial services market includes credit unions as a viable and competitive consumer finance option.

At this industry juncture, the state-chartered credit union system offers the greatest opportunity to advance the personal finance interests of consumers and assure the future safety and viability of the credit union business model. Throughout the history of the dual charter system, state credit union charters and state supervisory authorities have demonstrated that they are consumer-aware and market-aware. This is evidenced by state regulators’ exposure to and experience with increasingly sophisticated operations and risk management techniques (e.g., derivatives transactions) and historical state-led regulatory innovations such as field of membership (FOM), CUSO permissibility, loan participations, and member business lending authority. My objective as NASCUS CEO is to leverage the dual charter system by tapping the unique synergy between state regulators and state-chartered credit unions to place competitive pressure on the federal credit union regulatory regime such that all credit unions and America’s consumers benefit.

In closing, I thank the NASCUS membership, Board, Advisory Council, and staff for your belief in the collective impact of the state credit union system. It is my honor and privilege to serve with and beside you.


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