ST. PAUL, Minn., and BISMARCK. N.D. (12/2/14)--An increasing regulatory burden is creating a "too small to succeed" environment for community financial institutions rather than eliminating "too big to fail" financial institutions as new regulations were intended, two credit union league presidents wrote in an opinion piece that appeared in the Nov. 28 issue of Prairie Business magazine.
The Credit Union National Association strongly agrees and continues to work aggressively with federal policymakers in Congress and at the agencies to reduce the regulatory burden on credit unions.
To preserve the influence of local institutions in their communities, credit unions and community banks must consider joining forces and working with small businesses to speak with a united voice, wrote Robbie Thompson, president/CEO, Credit Union Association of the Dakotas, and Mark Cummins, president/CEO, Minnesota Credit Union Network.
Small financial institutions face the threat of being regulated out of business, the league presidents wrote. "And if this happens, the real losers will be our communities, small businesses and consumers that will lose the hometown type of financial institutions that make decisions locally," they added. "Small financial institutions like credit unions and community banks are the lifeblood of our communities."
The cumulative effect of multiple federal regulators issuing numerous and complicated new rules makes it more difficult for community financial institutions to operate. "Since 2008, credit unions have been subject to 181 new rules--many of which are hundreds or even thousands of pages in length," Thompson and Cummins wrote. "In January 2013 alone, the Consumer Financial Protection Bureau issued more than 3,000 pages of new mortgage rules required by the Dodd-Frank Act. Many of these new rules involve costly changes to processes, computer systems and job responsibilities."
Each new regulation, while intended to right the past wrongs of others, makes it continually more difficult for small financial institutions to operate. But credit unions did not cause the financial crisis and for the most part did not engage in the practices that caused the mortgage meltdown, Cummins and Thompson wrote.
While the intent of such regulations was to eliminate "too big to fail" large financial institutions, community financial institutions increasingly feel they are "too small to succeed."
Since 1997, the largest 100 banks have increased their market share to more than 70% from roughly 40%. "This is due, in part, to the increased challenge smaller financial institutions have in coping with the creeping complexity of regulations," Cummins and Thompson wrote. "In order to stem the tide of overregulation and ensure continued access to local credit decisions by local financial institutions, community banks and credit unions must enlist the support of small business and work together."
CUNA continues to work to reduce the regulatory burden on credit unions.