Given the stressed economic environment, the failure of some financial institutions and the troubled mortgage market, it is natural that policymakers are reassessing the nation's regulatory structure in an attempt to prevent future crises.
While initial discussion on the U.S. Treasury's Blueprint for a Modernized Financial Regulatory Structure has settled, it is critical for the credit union system to be prepared to defend and to protect the dual chartering system.
The Blueprint's long-range plans suggest a federal consolidation of the regulatory system, elimination of credit union and bank dual chartering and a shift to federal supervision of financial institutions. While some of the Blueprint's short-term recommendations may help address current market problems, we need to be cautious of far-reaching proposals to restructure the state and federal regulatory systems.
In this economically challenging time, we must not lose sight of what has worked for nearly 100 years-the credit union dual chartering system. While the current system was not deliberately engineered, it provides important choice, competition and innovation for regulators and credit unions. NASCUS has long believed that the dual chartering system is a source of strength for the credit union system. The dual banking system has been around for more than 200 years, also providing a choice for financial institutions and consumers.
Dual chartering is dynamic in its ability to provide opportunities for innovation and experimentation so that both state and federal charters can expand and grow with their members. Without the dual chartering system, there would be no laboratory for the charter enhancements that have made credit unions what they are today.
Regulatory consolidation is not a new topic; it has come up in Congress before. Fortunately, the value of dual chartering and choice between state and federal charters continue to outshine attempts to apply federal regulatory uniformity. We need to continue to communicate the value of the dual chartering system to policymakers and legislators on the state and national levels.
Of course, the system is not perfect. Enhancements can be made and state and federal regulators work diligently to promote efficiencies in examination and supervision to reduce any burdensome regulatory footprint on credit unions. But dissolving the dual chartering system is not part of a logical solution to the economy's problems. Eliminating dual chartering would diminish state and federal regulator cooperation, tip the balance of power between states and the federal government and minimize the economic benefit and enhanced consumer protections available through state supervision of state-chartered institutions.
Dual chartering benefits regulators, too. State and federal regulators are in dialogue throughout the year addressing trends and revisiting national policies to protect safety and soundness. They push each other to improve and to continue achieving the highest standards in safety, soundness and public confidence for credit unions. State regulators and the NCUA meet regularly and stay in constant communication to protect the safety and soundness of credit unions. That is dual chartering at work.
Treasury's proposal challenges the foundation that dual chartering has built in this nation for choice in financial services. NASCUS has charged state regulators and state-chartered credit unions with a mission to join us in continuing to fight federal regulatory consolidation and threats to dual chartering. We urge you to help us preserve and enhance the vital elements of competition and choice that dual chartering provides for credit unions. Let's continue to protect dual chartering and choice in financial services.
Mary Martha Fortney is president of the National Association of State Credit Union Supervisors (NASCUS) and can be reached at marymartha<at>nascus.org. (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com/ http://www.sourcemedia.com/