Happy New Year! Are your resolutions in place? If not, here's one to add to the list - try to shed the extra weight that compliance burdens have imposed on your credit union over the past several years. In a recent survey by CU Service Network of over 60 credit union executives, it was uncovered that the overwhelming majority identified credit union compliance burden as a top critical issue facing credit unions. In fact, 98% of the executives surveyed, from credit unions ranging in size from $30M to $1.6B in total assets, ranked compliance as the number one issue on their mind, especially given the increases in regulations and audits over the past few years.
CUNA conducted a study in 2015 and reported that the financial impact of regulation and compliance burdens on credit unions spiked to $6.6 billion. This is equivalent to 20% of total credit union industry operating expenses and 40% of staff expenses. For smaller credit unions who are operating with limited staffing, the impact can be detrimental. Much needed Member Service Representatives are being tasked with projects to address regulations. Tellers are being taken off the line to assist with reporting needs for examinations and audits. C-Level execs are spending more time and budget on issues such as cybersecurity than on setting strategic initiatives and goals for the organization.
New regulations, many that arose under the Dodd-Frank, have forced a good number of smaller credit unions to seek out mergers in order to stay afloat, or worse, close due to being unable to handle the additional resource demands. NAFCU president and CEO Dan Berger points a good part of the blame on the declining number of credit unions to Dodd-Frank. "We believe the numbers speak volumes about the devastating impact of the Dodd-Frank regulations. Since the second quarter of 2010, the number of credit unions has decreased by more than 17% (more than 1,280 institutions). Specifically, 96% were smaller institutions with assets of less than $100 million.”
For those credit unions struggling with a solution to address this increased burden, as with a new year's weight loss program, diet and exercise are key. Trim excess expenses in areas that aren't as crucial, and re-appropriate time and energy into streamlining operations to lessen the burden. Be proactive by considering or selecting a credit union core software system that includes regulatory compliance, this will ensure your credit union remains compliant without the need to budget. Credit union technology providers that want to act as your partner in the industry provide efficiencies that cannot be quantified in traditional ways. What is your credit union doing to manage the additional stresses of compliance burden?