American credit unions—like their counterparts around the world—are vastly different than large international banks and should be regulated as such, CUNA Chief Advocacy Ryan Donovan said Wednesday. Donovan spoke during a World Council of Credit Unions webinar on the importance of proportionality from standard setters.
Proportionality allows national-level regulators to tailor rules often designed for large, internationally active banks to allow local, community-based financial institutions to operate.
CUNA and the World Council wrote to Treasury Secretary Janet Yellen earlier this year calling on the G20 to include language in its declaration noting that proportionality is essential to increase financial inclusion.
“One of the core principles of advocacy is figuring out how the information we have in advocates can play in the decision-making process, how are we relevant to them?” Donovan said. “That’s part of what we’re trying to do before G20, to show how much these standards impact us...That’s why G20 language on financial inclusion and proportionality is important, it really represents global community coming together to say that one-size-fits-all regulation is counterproductive to financial inclusion.
“The more we can get these international standard-setters—in this case the G20—endorsing this proportionality idea, the better chance we’re going to have that our regulators and lawmakers implement proportional regulations,” he added.
Donovan said that, consciously or subconsciously, American regulators such as the Treasury, Consumer Financial Protection Bureau (CFPB), and NCUA take cues from the global regulatory community and apply those standards to the entities they regulate.
“These global regulators are primarily concerned with preventing another financial crisis,” Donovan said. “That’s why it’s so important to the World Council and its members to advocate, to take our message to standard setters and policymaker, because they care less about the effects on small domestic cooperatives, and that’s a huge burden for us to overcome at the international level.”
Donovan added that American credit union regulators have has taken notice of banking regulators’ requirements and have tried to apply similar standards to credit unions in many cases.
“Our goal is to get them to tailor their rules to the size and risk profile of credit unions… We can point out difference in motives. Banks are for profit, and their customers are a means to that end,” he said. “As credit union, the member is the reason the credit union exists. As a result, credit unions operate a much less risky model than banks do, and that’s important.”
The complete webinar is available at the World Council’s YouTube page, or can be viewed below.