Ferris says some institutions have learned to seize opportunities for revenue from the demand for stricter compliance, citing two types of credit unions: The “haves” and “have-nots.”
The former are proactive and embrace compliance and enterprise risk management as a means to discover potential new profit sources, Ferris says. “The have-nots take a minimalist approach, doing only what’s absolutely necessary to comply with regulators. They’re not taking the long-term interests of the credit union into account. When we mention ‘compliance’ or ‘risk management,’ they tune out.”
The have-nots oft en change their minds, however, when Ferris shows them the benefits of paying full attention to compliance and risk management. “A credit union that is mindful of risks across the enterprise better understands the potential enterprisewide consequences, and can pull the trigger much faster either to introduce a new product or program or to cancel it.
“Fundamentally, we ask what and how can we leverage organizational value rather than simply meeting compliance requirements?” he continues. “Some compliance efforts offer an opportunity to rethink processes.”
While most credit unions will successfully address compliance issues, some may decide the burden is too heavy. “Some credit unions are overwhelmed by regulatory burdens, especially those created by the CFPB and the Dodd-Frank Act,” says Donahue. “Smaller credit unions feel like they’re being regulated out of business. Don’t be surprised if this leads to more mergers.”
Over-regulation dampens optimism
Credit union CEOs were much more pessimistic going into 2013 than they were going into 2012, according to a survey of credit union executives by Abound Resources, a CUNA Strategic Services alliance provider.
The primary driver: An increasingly difficult and unpredictable regulatory environment.
One-fourth of credit union CEOs are “very” or “somewhat” pessimistic about their credit union’s outlook for 2013, the survey reports. In 2012, 16% of executives were pessimistic, but none were “very pessimistic.”
Only 37% of those surveyed are optimistic or very optimistic about 2013, compared to 43% in 2012.
Other major issues of concern are a weak economy and poor loan demand.