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Global panel Regulatory pendulum likely to continue swing
GDANSK, Poland (7/18/12)--
Click to view larger image Credit union trade association executives and regulators joined together for a panel discussion Tuesday at the World Credit Union Conference in Gdansk, Poland.
The recent global financial crisis has caused the pendulum of credit union regulations to continue its swing toward more stringent oversight. But its movement can affect both credit unions and regulators who oversee them. So says a panel of trade association leaders and regulators that kicked off Tuesday's general session at the World Credit Union Conference in Gdansk, Poland.

The conference, presented by the World Council of Credit Unions (WOCCU), convened Sunday and will end today.

Entitled "Point Counterpoint: Finding Regulatory Balance in the Era of International Standards," the panel was moderated by WOCCU Secretary Louise Petschler, CEO of Abacus Australian Mutuals, and included representatives from Canada, Great Britain and the U.S. 
Click to view larger image Panel participants sharing a lighter moment during discussions included, from left: Mark Lyonette and Martin Stewart of Great Britain, and Bill Cheney, president/CEO of the U.S.'s Credit Union National Association.
They were:

  • Bill Cheney, president/CEO of the Credit Union National Association (U.S.) ;
  • John Kutchey, deputy executive director and chief operating officer of the National Credit Union Administration (U.S.);
  • David Phillips, president/CEO of Credit Union Central of Canada;
  • Andy Poprawa, president/CEO of the Deposit Insurance Corp. of Ontario (Canada);
  • Mark Lyonette, chief executive of the Association of British CUs Ltd.; and
  • Martin Stewart, head of United Kingdom's Banks and Mutuals of Great Britain's Financial Services Authority.
Click to view larger image Regulators don't write the rules, they just enforce them, said Canada's Andy Poprawa.
Topics ranged from the International Credit Union Regulators' Network, which Poprawa chairs and for whichWOCCU serves as secretariat, to the impact of Basel III and the correct balance to properly enforce financial regulations that enable credit unions to operate both safely and effectively. Both sides admitted that balance was sometimes difficult to find and maintain, with a need to differentiate between complex commercial banks and consumer-focused credit unions.

"In Great Britain, we're a small segment and we're worried we'll be swept up with other financial institutions," Lyonette said. "Fortunately, credit unions are getting good political and public support."

To some panelists, the swing away from traditional "light touch" regulations to a tougher stance raised concerns about the future of the movement.

"Credit unions aren't asking for more regulation," CUNA's Cheney said. "If we continue down the path we're on without distinction between banks and credit unions, we may end up with no local financial institutions."

"Remember that regulators don't write the rules," Poprawa cautioned, speaking for regulators everywhere. "It's not us you have to convince, but your respective governments."

Click to view larger image Don't lose sight of credit unions' democratic process when selecting board members, stressed audience member Penny Reeves, Canada.
The group also discussed regulatory impact on small start-up credit unions and the need for directors educated in a broad range of skills to provide effective oversight for their institutions. A better educated and balanced board on which members have financial services industry experience will help keep the credit union on track and moving in the direction of member service, according to Stewart.

"But let's not lose sight of the fact that credit union directors are elected by the members," said Penny Reeves, a director for Canada's Servus CU and a former World Council director, who raised her question from the audience. "We can't afford to lose that democratic principle."

All regulators on the panel agreed that credit unions got good marks during the financial crisis for helping consumers instead of turning their backs on them like many banks. The resulting good will follow credit unions well into the future, according to Kutchey.

"In the U.S., credit unions were a shining symbol of service during the financial crisis," Kutchey said. "Bank Transfer Day [Nov. 5, 2011, when 1.3 million Americans began moving their money from banks to credit unions] also had a positive outcome for credit unions."

Continued global advocacy by WOCCU will be critical to helping set the regulatory tone for international groups like the Basel Committee on Banking Supervision, as well as providing appropriate reference points for local regulators to better steady the regulatory pendulum from swinging too far in the wrong direction, the panel said.

Click to view larger image We need to exercise restraint in enacting new regulations, said Canada's David Phillips as panel moderator Louise Petschler looked on. (Photos provided by the World Council of Credit Unions)
"In Canada, the prime minister established a body that operates on the one-to-one rule," Phillips said. "If you're going to draft a new regulation, you have to repeal an existing regulation that has similar financial impact. That speaks to the need for exercising some restraint on our regulatory burden."

The day continued with breakout sessions on ethical investing, attracting members through social media, creating integrated credit union system business models and the new face of technology fraud. A special session on building the credit union brand took a look at World Council-led efforts by credit union and trade association professionals in Australia, Canada and the U.S. to rebrand the global credit union movement. Results from the session will be used in the next phase of the project's development process.

The 2012 World Credit Union Conference ends today with a closing general session presentation by Bank 2.0 author Brett King, World Council's annual awards ceremony and reception at the historic Gdańsk shipyard, the birthplace of Poland's Solidarity movement.
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