WASHINGTON – In 2009, credit unions once again may find themselves being caught up in a call for an overhaul of federal banking agencies.
In a new survey conducted by Credit Union Journal affiliate American Banker, 73% of the roughly 150 financial executives asked about such a reform plan said they support it. But that is where the agreement ends.
The Executive Forum survey, conducted in October with Greenwich Associates LLC, found bankers divided into two camps based largely on size. Large-bank executives were more uniform in calling for an overhaul and said the current level of oversight is too weak. Small-bank executives said any reform should be focused on making oversight more efficient and reducing unneeded burdens.
Observers said large institutions recognize that the current turmoil stems in part from outdated regulations' inability to catch up to changes in the business.
"Because of what's happened in the current environment, and because we've seen where the loopholes are," regulatory reform "just makes sense," said Melissa Netram, the director of regulatory affairs at the Financial Services Roundtable. "There are so many products and services that were not thought about in the legal and regulatory structure that was developed in the '30s."
But small-bank executives feel just as strongly that the current structure leaves them overregulated, with overlapping agencies and repetitive compliance requirements eating up resources.
"The compliance burden on a smaller bank – in terms of needing the people and the systems in place – is killing them," said Nicholas Ketcha, a former director of the Federal Deposit Insurance Corp.'s division of supervision and now a managing director at the bank consulting firm FinPro Inc. "With the larger banks, they can afford to have a separate department" to focus on compliance. "It's inconceivable for the smaller banks to do that."
Some analysts cited a need to consolidate agencies and to base assignments on business functions, rather than an institution's charter class. Many reform proposals, including the Treasury Department's March blueprint that called for NCUA to be eliminated, have called for the absorption of certain agencies into others, as well as more principle-based oversight.
