MADISON, Wis. (2/23/12)--Federal policymakers' focus on creating a "level playing field" can impair the competitiveness of credit unions and other small financial institutions, according to a report released by the Filene Research Institute.
Blayne Haggart, author of "Keeping an Eye on the Ball: Credit Unions, the Level Playing Field, and Competitive Balance," suggests credit unions should use the metaphor of seeking "competitive balance" to advocate for policy changes that would better serve the credit union system.
Haggart, who holds a doctorate in political science with a specialization in political economy, is a visiting scholar at the Regulatory Institutions Network at Australian National University. He says the "level playing field metaphor" used by federal policymakers in the U.S. seeks to have all financial institutions operate under the same rules regardless of size, purpose or structure.
The federal rules produced by that approach govern issues ranging from money laundering and terrorist financing to interest rates and branch accessibility. The report notes that while this approach appears neutral and fair, it may lead to unintended outcomes that impair credit unions' competitiveness.
Haggart compares the two metaphors by examining the competitive settings in which they are often used. A "level playing field" metaphor may be conveyed by games such as football or hockey where teams vie for supremacy in a competition based on a fixed set of rules administered by a neutral referee.
A "competitive balance" metaphor is linked to a competition where handicapping is applied, such as in golf or chess, to use scoring compensation or other advantages to create fair competition among the participants.
The report argues that using a competitive balance approach would force credit unions and policymakers alike to focus on objectives such as maintaining adequate competition in financial services, rather than "prejudging" the methods for achieving those results.
"A competitive balance approach to regulation thus offers the potential for more results-driven, reality-based regulation," Haggart said.
For more information about the report, use the link.