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Current regulatory structure right for CUs says CUNA
WASHINGTON (11/27/07)--Consolidating federal financial institution regulatory agencies would have dire consequences for credit unions because they are “distinctive and exceptional financial organizations” that require their own regulatory framework, the Credit Union National Association (CUNA) said in a recent comment letter to the Treasury Department. The orientation of an amalgamated agency would favor large commercial banks and other more affluent institutions over not-for-profit credit unions, as history has shown, CUNA said remarking on Treasury’s ongoing review of the framework for the regulation and insurance of financial institutions. Credit unions are distinct from other financial services providers and as a result and in order to preserve those differences -- which Congress has determined benefit the public -- the regulatory framework for supervising credit unions must reflect and facilitate those distinctions, the CUNA letter said. As evidence, CUNA pointed to the past – specifically 1942 to 1948, when the Federal Deposit Insurance Corp. (FDIC) supervised federal credit unions. In 1946, for example, the FDIC issued an audit report to Congress which declared “the supervision and examination of Federal Credit Unions was an extraneous function of the Corporation.” Subsequently, in 1947, the CUNA Board of Directors wrote to President Harry S Truman asking that the regulation of credit unions be transferred from FDIC. In 1948, the Congress created the Bureau of Federal Credit Unions, the predecessor to the National Credit Union Administration, to be the new, solely credit union-oriented regulatory agency – and removed credit unions from FDIC’s regulatory jurisdiction. CUNA also pointed out in its letter that the FDIC’s recent attitude toward credit unions aligned more closely to the banking industry. Noting that immediate past FDIC Chairman Don Powell called for taxation of credit unions, CUNA said the chairman’s words aligned him with the banking industry’s position, but was directly at odds with the Bush administration’s support of the credit union tax exemption. In other comments, CUNA noted its support for a continued National Credit Union Share Insurance Fund (NCUSIF) that is independent of other federal deposit insurance funds and still administered by the NCUA; the continuation of the credit union tax exemption; the benefits of the dual chartering system of federal and state credit unions; the critical nature of reforming “prompt corrective action” requirements for credit unions; the need for additional regulatory relief; and the need for flexibility in regulation and safeguarding reasonable consumer interests. The Treasury Department has been seeking comments—due Nov. 21--on the regulatory structure of the country's financial institutions and whether changes are needed to improve regulation. The Treasury request came on the heels of a Government Accountability Office (GAO) study released last month that examined federal financial institution oversight and recommends consolidation of the regulators. Mary Dunn, CUNA senior vice president and deputy general counsel, has said that comprehensive restructuring is not an imminent threat to credit unions. It would require statutory changes that could not happen quickly—and certainly not this year. Also, the leadership of neither the House nor the Senate committee with jurisdiction over financial services matters has publicly identified such restructuring as an upcoming issue. "Nonetheless, the GAO study was required by Congress, and any time the government reviews regulatory consolidation there is reason for concern," Dunn has said.


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