SAN DIEGO-Chief financial officers at credit unions across the country say the biggest impediment to improved efficiency is the regulatory burden.
Pam Finch, CFO for Mid Minnesota FCU, Baxter, Minn., and the outgoing chair of the CUNA CFO Council, said the regulatory load has tipped into the "excessive" category in the last year-plus.
"We are having to document and support our position on what we have been doing, and NCUA just came out with a new regulation on interest rate risk," she said. "It will require more things from credit unions that are not part of our business model, and it is about something that is not a demonstrated problem. Examiners are going to come in and tell me to do things I've never had to do at my credit union."
According to Finch, the end-result of all the new regulations is "a diversion of resources," meaning CFOs "aren't devoting resources to take our credit unions to the next level. Instead, there is so much extra documentation required, which gives examiners license to criticize, even the areas that are doing well."
There were 36 new regulations issued from May 2010 to May 2011, she noted, and yet those being regulated still have more questions than answers. "We don't know when it will end," Finch said, especially as the new Consumer Protection Bureau introduces its new rules.
"It is difficult to know how we are going to take our credit unions to the next level and deal with the compliance burden, all without hiring new staff. We need to share resources and knowledge, which is what the CFO Council has been focusing on," she said. "That is why our Council has continued to grow even with economic hardships. We need to navigate our way through all these regulations. Our members are getting real-world solutions from each other, which is why credit unions are choosing not to cut the cost of Council membership when they are cutting other costs."
Et Tu, FASB?
Not all of the burden coming down on chief financial officers is from the government, Finch pointed out. She said the Financial Accounting Standards Board (FASB) has reformed the way credit unions account for their financial information-which has meant "many more pages" of disclosures.
"We will have to change the methodology we use for allowance for loan losses to meet the disclosure requirements. So CFOs have an extra layer beyond the new regulations we are getting from NCUA."
Finch is happy the economy is improving, but in the aftermath of the recession she said there are "so many 'what ifs' still out there."
"There are more requests from regulators for information, such as loan analysis. Some small credit unions are having to pay for portfolio analysis, which is a lot for some of them. In the end we will have more information, but we are having to pay for it."
Asked if she had a message for regulators, Finch declared: "Let us relax, let us catch up, let us go over our business model to make sure we are planning into next year, but let us breathe for a second."
