Week ahead: Credit unions wrestle with fallout from protests, pandemic

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Race relations, the coronavirus pandemic and lawmakers’ gradual shift away from legislation that responds to the virus are shaping the week ahead for credit unions.

This week, lawmakers in the House are expected to unveil a new package of legislation aimed at reforming police practices nationwide, including ways to address claims of systemic racism within the force and stopping police brutality. As the nation continues to grapple with questions of prejudice and systemic racism after the deaths of George Floyd, Breonna Taylor and others, credit unions are reassessing how those issues intersect with the industry.

Last week multiple industry figures — including leaders of the Credit Union National Association and the chairman of the National Credit Union Administration — called on credit unions to do more to address those issues. Nationwide demonstrations have forced credit unions to rethink what role the industry might have in conversations surrounding social justice.

At least one credit union that was initially reluctant about putting out a statement about the protests did so late last week, saying it was “committed to being an antiracist organization.”

“We are…acutely aware that the inequities that our members face with mainstream financial institutions is a symptom of institutionalized racism and systemic oppression baked into the very fabric of our country. For hundreds of years, these systems have perpetuated disproportionate violence against black Americans,” read a statement from One Detroit Credit Union, signed by Chairman Orlando P. Bailey. “The protesting that we are experiencing in Detroit, Minneapolis, and around the country is warranted and is needed to move the needle toward tangible and sustainable change in our communities. We stand alongside and in support of our members raising their voices to demand an end to the injustices black communities face all over the United States, including Detroit.”

Some trade groups have also come out in support of protestors.

“We stand in solidarity with the black community in mourning the deaths of George Floyd, Breonna Taylor, Ahmaud Arbery and the countless others who have been subjected to violence due to police brutality and systemic racism,” Lucy Ito, CEO of the National Association of State Credit Union Supervisors, said in a statement Friday. “NASCUS believes that black lives matter and we are committed to fostering an environment free of racism where everyone is seen, heard and respected.

Jim Nussle, CEO of CUNA, on Monday morning briefly discussed a directive last week from the trade group’s board that the association come up with actionable steps by mid-August to combat systemic racism. He emphasized that the effort will include the African-American Credit Union Coalition and other groups from across the industry, and not just be led by CUNA and its league partners.

“We want to include a number of voices, but particularly those that can help us advance equitable service to black communities,” he said.

Slowly moving back to normal?

After further changes last week to the Paycheck Protection Program, some observers have said that while lawmakers will continue to address the virus as needed, things are shifting back to a more normal legislative environment.

A variety of House and Senate hearings are expected this week. This includes a Senate Banking Committee hearing Tuesday on oversight of federal housing regulators and a House Financial Services subcommittee look at renters and evictions in the wake of the coronavirus. There will also be a markup of the 2021 National Defense Authorization Act in the Senate Armed Services Committee on Wednesday.

Congress’s shift back to normal reflects wider patterns as states continue to lift stay-at-home orders. Six states will hold primaries this week — including some that had postponed them earlier due to the coronavirus — and more than two dozen credit union-backed candidates are competing in federal races.

Similarly, while the start of summer would ordinarily signal the beginning of credit union conference season, events are still taking place, but many in a digital setting. The National Association of Federally-Insured Credit Unions this week begins a series of state-specific events all being held virtually.

Last week, the Defense Credit Union Council became the latest industry group to cancel its annual gathering, while the Cornerstone Credit Union League announced plans to bring its annual leadership conference online.

Pandemic’s impact still being felt

CUNA is expected to release new data this week on credit union performance for April, the first full month the industry grappled with the pandemic. Among the results, CUNA Chief Economist Mike Schenk said during a Monday press call, is a 14% uptick in savings year over year, he said.

There was also a slowdown in lending, leading to a decline in the industry’s loan-to-share ratio, which he reported dropped from 84.4% at the start of the year to 78.1% in April. That’s the largest four-month decline at the start of the year since tracking began 30 years ago.

Delinquencies are also up 23%, compared with April 2019, according to Schenk.

Still, Schenk said, “we are on margin more upbeat than we were a month ago” in part because of a stronger-than-expected jobs report release last week, which “means we believe loan losses will be a bit lower than we originally forecasted.”

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Racial Bias Under-served populations Diversity and equality Coronavirus Consumer banking Deposits Delinquencies Law and regulation