Apr 27 2009

Evaluating the Single Financial Services Regulator Question


Today, it is commonplace to hear policymakers, industry participants and analysts speak about how our financial services regulatory system has failed us. Recent events have underscored this sentiment with unprecendented actions by the NCUA and the U.S. Treasury. To ensure you are informed about the issues and decisions ahead of us, this report explores the much anticipated reregulation of the financial services sector in the United States with a special focus on the impact a single financial services regulator may have on the credit union system.

We examine this specific topic because a variety of political, economic, and social trends foreshadow its creation. Our analysis is based on an extensive and independent review of existing academic and policy research on this topic.

In our analysis we recommend credit unions take the following points into consideration:

  • Beware the tide: Public and political opinion seems to be pushing for a major overhaul in the financial regulatory structure. In normal times, such proposals would end up in the trash heap of previous modernization proposals, but these are not normal times. While we don’t expect credit unions to wither up and accept a new regulatory structure, it may be wise to prepare for a single regulator scenario.
  • Getting to yes: If the tide of change is indeed too strong, credit unions should be proactive in getting what they want. The experiences of UK and Australian credit unions may be beneficial models to study and understand.
  • Be helpful: Influential policymakers have extolled credit unions’ behaviors leading up to and during the current economic crisis. Credit unions have the unique 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.

The days, months, and years ahead portend a financial services regulatory structure that looks very different from the current model. While it is foolish to predict what the exact regulatory structure will look like, the probability of a more consolidated structure is quite high. Our aim with this report is to present an independent view of this topic so that your credit union may traverse the future a bit more confidently.