Regulations imposed by Congress during the financial crisis have had an unintended impact on credit unions that don't raise capital from Wall Street, but are locally managed and owned by their members, Mark Cummins, president/CEO of the Minnesota Credit Union Network, wrote in an op-ed that appeared in Minneapolis StarTribune.
Cummins cited a recent study by CUNA that found Minnesota credit unions have incurred $102 million in costs directly related to the increased regulations, and $18 million in lost benefits to credit union members.
“These impacts are considerable in terms of the scale of a credit union's operation, and include costs of staffing, third-party expenses, capital expenses and reduced revenue opportunities,” Cummins wrote.
Since the financial crisis, credit unions have been subjected to more than 200 regulatory changes. The CUNA study found that the regulatory costs for credit unions were 15 basis points higher than they would have been without the changes. One in every 4 employees' time is now spent on "regulatory compliance," the study noted.
In the CUNA study, credit union CEOs noted that the strategic impact of regulatory cost increases directly affects member benefits. Funds dedicated to regulatory needs would have been used for better member pricing, better service delivery and institutional strengthening.
“Credit unions recognize that they operate in a regulated industry and must bear reasonable costs of regulation,” Cummins wrote. “However, the ‘one size fits all’ approach to regulation is ineffective.”
Credit unions have disproportionately paid the price for actions by big banks that caused the financial crisis, Cummins noted. “Big banks had to be bailed out by taxpayers, while financially sound credit unions were there to help members weather the storm,” Cummins wrote. “Despite not causing the problem, credit unions face the same expensive regulatory burdens and this hurts consumers and small businesses.”