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What lies ahead for CUs?
The second panel looked at what lies ahead for credit unions in different parts of the world. Panelists Louise Petschler, CEO of Abacus-Australian Mutuals and a WOCCU director; Bill Hampel, CUNA senior vice president and chief economist; and Hervé Guider, general manager of the European Association of Cooperative Banks, also tackled the topic of board performance at the request of moderator and WOCCU director Daniel Burns, chair of Central 1 Credit Union in Canada.
“Australian credit unions are regulated to the same degree as banks and all financial institutions,” said Petschler. “Directors must pass a skills test to serve. If there aren’t sufficiently qualified directors on a board, the board may appoint other directors rather than wait for them to be elected by the members.”
Guider agreed directors must be able to demonstrate both independence and qualifications before accepting a board position. While Australian directors are paid, European cooperative bank directors and U.S. credit union directors aren’t.
The U.S. also has no regulated standards for directors, said CUNA’s Hampel, who supported the importance of qualified candidates, but also cautioned the audience, “Having a specific area of expertise on the board does not necessarily guarantee success.”
The panel also touched on the impact that new interchange fees will have on credit unions. Australia passed similar legislation three years ago, and the net result has been less flexibility, higher fees for consumers, and greater profits for major retailers and large banks, Petschler said.
Lack of member growth also became the topic of debate. Ironically, field-of-membership qualifications that once helped U.S. credit unions grow have proven to be an impediment, according to Hampel.
“Field-of-membership requirements used to be a severe restriction on credit union growth, but its legacy has proved to be just a severe nuisance,” said Hampel. “It retards growth and that growth would be greater if we could get rid of the restriction.”
“Credit union growth is also hampered by the fact it’s so difficult to switch financial institutions,” he said. “The process of closing accounts at one institution and opening them at another institution is intimidating enough to prevent many consumers from doing it.
“Also,” he continued, “credit unions are co-ops, and co-ops are frequently less aggressive than their for-profit competitors. All these factors combine to inhibit credit union market-share growth.”
“In Australia, four banks control 90% of the market, and credit unions have the remaining 10%,” said Petschler. “The banks actually got larger during the turmoil in the global financial markets over the past two years.”
“The market-share situation is a little different in Europe,” said Guider. “In Germany, financial cooperatives have about 35% of the market. In Italy, they have 40% of the market and in the Netherlands they also have 40%.”
Michael Muckian is communications manager for World Council of Credit Unions.
Steve Rodgers is editor of Credit Union Magazine.