LAS VEGAS -
The vice chairman of NCUA believes credit unions should make the general public aware of the fact membership in a CU equals ownership.
"Members are owners, and the more attention called to that, the better people will understand the credit union value proposition," he said. "At credit unions, one share means one vote; unlike other financial institutions where the person with the most money has the most votes."
Hood sat down with Credit Union Journal during the recent NACUSO annual conference here to discuss opportunities and challenges for CUs. He stressed the necessity for all credit unions to develop innovative strategies to provide member/owners with value.
"It is important to market the unique value proposition credit unions offer," he advised. "In addition to ownership and a democratic nature, credit unions focus on relationships, not transactions. As credit unions continue to build neighborhoods by offering affordable housing products, member business loans and financial literacy, they are offering everything one would look for in joining a financial institution."
CUs should be praised for, and proud of, their resiliency and robustness in the face of earnings pressure from flattened yield curves, he said. "Credit unions must continue to meet the needs of their member/owners by working with CUSOs on product innovation to increase the diversity of their offerings."
According to Hood, the recent hostile takeover attempt by Wings Financial FCU of Continental FCU was "not appropriate." He said he wants to ensure the 8,300 CUs he oversees remain "vibrant" for years to come, but added, "the collaborative nature of credit unions and the people-helping-people philosophy are not supported by hostile takeover attempts."
The notion of outsiders buying CUs is not something Hood currently is concerned with, nor has he heard of such deals in the works. He said the job of a regulator is to ensure the member/owners of a credit union targeted in a potential takeover have accurate information-similar to his view of conversions. He said in either situation, member/owners must have enough information to make an informed vote.
CUSOs bring "market-driven solutions to age-old challenges to the credit union system," Hood told the audience during his address. With more than 1,000 active service organizations today, he noted credit unions have invested $700 million in their CUSOs.
"I think that is extraordinary," Hood said.
Hood has two goals as vice chairman of NCUA, he said. First, regulation needs to be effective, not excessive, if credit unions are to meet the demands of today's marketplace. To this end, he said one-third of all regulations affecting CUs are reviewed each year, meaning every regulation is reviewed every three years. Hood's second goal is the need to manage risk, not avoid it. "Regulators must think outside the box," he declared. "One way is to attend events such as NACUSO to look for best practices."
CUs should remain committed to member business lending, Hood continued. He said credit unions are "uniquely positioned" to help people build viable businesses.
It is imperative in today's financial landscape to look beyond credit risk of borrowers to "enterprise risk management," which includes all factors that could affect the business climate, he said. "People rarely hear a regulator talking about embracing risk, but if credit unions don't embrace risk, they won't be able to compete."
One issue that keeps Hood awake at night is data security and data breaches. He suggested CUs should collaborate to improve security.
