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Filene studies single-regulator issues
MADISON, Wis. (5/7/09)--Regulatory restructuring of the financial services industry appears to be on the horizon. One potential component of the changes being considered is a single regulator for the entire financial services industry, says the Filene Research Institute. What would such a development mean for credit unions? That’s the question addressed in Filene’s new report, “Evaluating the Single Financial Services Regulator Question,” by Filene Chief Research Officer George A. Hofheimer. Hofheimer suggests that political, economic, and social trends foreshadow the potential for a single regulator, even though credit unions stand against the creation of such an entity. Hofheimer also advises credit unions to be constructive in shaping the changes to come. Credit unions have an opportunity to influence the new public policy structure to benefit “simple” banking organizations like themselves. Paradoxically, credit unions may have the opportunity to benefit in a new, more limited regulatory structure. While it would be premature to predict what the exact regulatory structure will look like, the probability of a more consolidated structure is high, Filene said. The report notes that financial regulation is a constantly shifting standard due to changes in the economic environments and the current U.S. financial regulatory system is replete with regulatory gaps. The current economic crisis is viewed by many, in part, as a failure of regulation, suggesting that major changes are necessary, the report said.
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The worldwide trend in financial services regulation has been toward a more consolidated structure, even though the link between financial regulatory structure and safety, soundness, and/or performance is weak, Hofheimer added. Due to credit unions’ difference from other financial institutions--their not-for-profit nature--little efficiency would be accomplished by including credit unions under a combined bank regulatory scenario, the Credit Union National Association (CUNA) has maintained and specifically said in a comment letter to the U.S. Treasury. CUNA also mentioned in the letter to the Treasury that the National Credit Union Administration--in its dual role as regulator and insurer of credit unions--has effectively served the best interests of credit unions and their members for nearly 40 years. For credit unions, the message is that public and political opinion seems to be pushing for a major regulatory overhaul, Hofheimer said. If the tide of change is too strong, credit unions should be proactive in getting what they want. “Credit unions may be the only major financial institutions that continue to have reputations for honesty, integrity and fairness. As such, credit unions have a unique opportunity to help lead the political process that results in a new financial regulatory system for the U.S,” said Filene Fellow William E. Jackson III, of the University of Alabama, in the report’s foreword. For more information about “Evaluating the Single Financial Services Regulator Question,” use the link. For information about Filene studies or becoming a member, call 608-231-8550.
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