Evaluating the Single Financial Services Regulator Question

Executive Summary

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 unprecedented 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. 

The fact that major changes to our current financial regulatory system are coming raises at least three questions for credit unions:

• What major changes are likely to occur?
  
• How will these changes affect credit unions? 
• What should credit unions do to prepare for these changes or to
  become involved in the policymaking process that leads to these
  changes?

What is the research about?

This report explores the forthcoming 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. This specific topic is examined because a variety of political, economic, and social trends foreshadow its creation, and credit unions stand against the creation of such an entity. The analysis is based on an extensive and independent review of existing academic and policy research on this topic.

What are the credit union implications?

In the analysis it is recommended 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.