Credit union memberships are growing at more than three times the rate of U.S. population growth as more consumers recognize the credit union difference.
Credit unions rank first among industries in the American Customer Satisfaction Index and reflect double the score of big banks on the Chicago Booth Kellogg School Financial Trust Index.
Banks are noticing, and they’re stepping up their anti-credit union rhetoric in response. New, sustained campaigns aimed at convincing policymakers that credit unions represent unfair competition are again the order of the day.
As in the past, the solutions bankers are peddling include more regulation and changes to the credit union tax status.
At the same time, bankers enjoy a dominant market presence, including a 93% market share of assets. And they’re reporting record profits, near-record stockholder dividends, and unparalleled tax advantages.
While some banks are performing poorly, credit union competition is at the bottom of the list of causes. Typical causes include economic and demographic pressures, fraud, mismanagement, nepotism, overly aggressive expansion, bad pricing decisions, excessive credit risk, weak asset/liability management, misguided investment decisions, bad service, and lack of synergy in mergers.
Any bank consultant will tell you this is not an exhaustive list.
As outlined in a recent CUNA “Research Roundup” blog post, even bank regulators recognize bank problems lie not with credit unions but with the banks themselves. “Years of misbehavior,” they say, have taken their toll.
“Restoring trust in banking is a public duty and economic imperative. Restoring public confidence needs to be a top priority for major banks…Aspirational leadership statements by bankers must be matched by effective and disciplined implementation programs. We’re proposing comprehensive reforms in the approaches to bank culture and conduct that are both essential and urgent,” said Jean-Claude Trichet, Group of Thirty (G30) chairman and former president of the European Central Bank.
The G30, comprised of international finance leaders, recently released results of a study that examined banks’ behavior and the impact of transgressions to the reputation of the banking industry.
The report, “Banking Conduct and Culture: A Call for Sustained and Comprehensive Reform,” brings to light findings of influential industry leaders.
Banking industry shortcomings the report identifies include the fact that “most middle managers fail to consider the impact of cultural and conduct issues, tending to instead focus on profitability as a performance metric.”
The report finds a “lack of progress in improving culture and values due to entrenched behaviors and insufficient buy-in on conduct and values initiatives” also plays a role.
The G30 believes the responsibility to transform corporate culture in the banking industry exists within the banks themselves, not with external regulatory requirements. “A core conclusion we draw is that most banks must aim for a fundamental shift in their overall mindset on culture. Banks must go back to placing service to individual customers and to communities first…. They must promote corporate culture in disciplined ways…. This is not just right and good ethics, it also makes good business sense, and it’s essential for ensuring a sound and healthy balance sheet.”
A cultural shift, the report concludes, “will require leadership, persistence, and consistency to overcome years of entrenched behaviors and attitudes to ensure the changes are lasting.”
Put simply, banks need to start acting like credit unions. Another interesting option, of course, would be for banks to convert to credit union charters.