I am indeed honored to join you today as thousands of America’s credit
union leaders gather in Washington this week to address governmental issues
affecting your institutions. I stand here today recognizing the vision and
innovation that
has brought the credit union system to the level of growth and outstanding
financial performance it realizes today.
In addition, I submit a challenge to each of you. Vision must continue to be at the forefront of your credit unions. Vision is that ingredient which expands thinking, reaches for new and innovative ways to reach out to members, and plans for the inevitable and the unforeseen. Vision is the addition of services to meet the changing financial needs of your members, whether they are delivered via the internet or over the counter It is the development of a succession plan for changing credit union leadership, be it planned or unexpected.
Your credit union is where it is today, due to someone’s vision. Preparing for the future and continuing to provide vibrant leadership will require vision on the part of all management and staff.
At NCUA, strong, visionary leadership is steady and we recognize that credit unions of today are not the credit unions of the 70s, the 80s, or the 90s….it is a different era, a changing time. Coupled with a renewed vision and a regulatory environment founded on safety and soundness and earned flexibility – there is no limit to what can be accomplished.
Joining hand in hand with vision, is Knowledge. Coupled together, vision and knowledge empower credit unions and their members to make wise choices for the future. Knowledge is power, however, without vision, the successes you enjoy today may be short-lived. Knowledge without vision will lead only to short-term success. For the long term viability of the industry, I challenge you to lead with vision for the future.
In recent weeks, the issue of credit union conversions to mutual savings banks has been quite visible in the news. I strongly believe that leaders of credit unions - as member-owned financial cooperatives - have an ethical and fiduciary responsibility to be straight forward, open and transparent with all decisions affecting its membership, charter, and structure.
Six months ago, as part of our annual review of one third of our rules, the NCUA Board proposed updating the rules governing conversions. The Credit Union Membership Access Act charged NCUA with reviewing and monitoring the methods and procedures of the membership vote for a credit union to convert to a mutual savings bank. Our rule, which requires a credit union to disclose to its members the potential consequences of this type of conversion, is within that Congressional mandate. The revised rule will enhance the members’ ability to make informed decisions about the conversion option by making full disclosures of the following:
The members will be informed that the conversion to a mutual savings bank may diminish voting rights. Instead of one member, one vote, which provides an equal voice to all members, including those of modest means, a mutual savings banks allots votes based on the amount of a member’s deposits. Members will also be informed that their ownership interest may be lost, should there be a subsequent conversion from a mutual savings bank to a stock institution.
The CUMAA provides that directors and senior management officials may not receive any economic benefit from the conversion of their credit union to a mutual savings bank, other than compensation and benefits paid to them in the ordinary course of business. However, if there is to be a subsequent conversion to a stock institution, the members deserve to be informed of the comparison of the stock related benefits available to the general membership compared to those available to officials and employees of the institution. This is intended to insure that management’s decision to begin the conversion process is based on sound business judgment reflecting the best interests of the members.
Recent events have raised important questions in addition to these disclosures, including whether NCUA’s regulations should require confidential balloting and independent third-party tabulation of votes, helping to ensure the integrity of the voting process itself. We are studying these issues and developing a second set of proposed rule changes to address these concerns.
As owners of the credit union, members have the right to vote to convert on the future of their credit union. They deserve to have the information needed to make an informed decision. The integrity of the process must be protected. As your regulator and insurer, the NCUA will not waver on our duties and responsibilities. Recognizing that knowledge is power, the ability to make informed decisions requires the need for access to the information. Just as important in deciding how to vote on an issue such as a potential conversion, knowledge is required to make decisions in daily budgeting, buying a home, or saving for retirement.
Recently, I was honored to be appointed to serve on the Financial Literacy and Education Commission signed into law by President Bush. The new Commission’s goal is to promote financial education and improve the financial literacy of all Americans. As part of the NCUA’s Access Across America initiative, we are and will continue to encourage credit union participation in developing financial education programs that instill the values of having a solid financial foundation. We will be working to coordinate and provide information to people of all ages, so that they might make informed decisions and have the power to realize their American Dream.
I know the credit unions represented here today have developed some of the most innovative financial education programs in the marketplace. Providing members with the tools with which to make financial choices stems from educating individuals on what those choices are – and more importantly what those choices mean to them.
Accessing the American Dream of financial self-sufficiency is not based on obtaining a loan or buying a new car; it is the very basics of education – knowing the importance of saving, how to balance a checkbook, budgeting, or investing for retirement.
Financial education fosters financial stability for individuals and for entire communities. The more people know about credit and financial services, the more likely they are to increase savings, become homeowners, and improve their financial health and well-being.
We have many challenges ahead. The personal savings rate in America last year dropped to 2% of disposable income. This is half of the average personal savings rate of 4% over the last decade, and down substantially from the 7.7% savings rate in 1992. Personal bankruptcy continues to rise with the biggest increases seen for younger borrowers. More than 20% of teenagers have credit cards and in 2001, spent more than $172 billion. Individuals under the age of 25 are the fastest growing group filing for bankruptcy. Clearly, education will help to guide these individuals into sound decisions. Americans spent more time last year planning for holidays and social events than they did planning their retirement. Most Americans have not developed a financial plan. We know that mortgage borrowers who receive homebuyer counseling have lower delinquency rates than homebuyers who have received no counseling.
Edward Filene said, “There is no permanent remedy for our economic and social ills other than better thinking, which must come through better education.” Credit unions have traditionally considered financial education to be part of their social mission and are well positioned to offer that education.
There are wonderful resources already available through the credit union community to assist with the financial education of your current and potential members. More than one fourth of the credit unions are offering formal youth programs. Many of you are familiar with the National Endowment for Financial Education (NEFE) High School Financial Planning Program, which recruits teachers and shows them how to team-teach the information. CUNA has been instrumental in sponsoring this program, and you can access these materials on the CUNA website. Nearly 2000 credit unions have adopted the FDIC’s Money Smart program.
Starting financial education early is the key to building a lifetime of great habits. A wonderful article appearing in last week’s Washington Post highlighted the credit union branch at the Jefferson-Houston School for Arts and Academics in Alexandria, sponsored by the State Department Federal Credit Union. Last year I had the privilege of leading one of their financial literacy classes. This year the elementary students are running a branch. Eight students have been trained as tellers; children are learning the importance of saving on a regular basis. Nearly one-fourth of the students in kindergarten through fifth grade have opened accounts since October. One eight year old was quoted as saying he’s saving his money so that “if you need some, you always have it.” A six year old said, “If you save money, you can go to college, because college costs a lot of money.”
It sounds simple, doesn’t it? These kids get it, because of the efforts of the State Department Federal Credit Union volunteers. This is but one example of the wonderful programs many of you have in place.
I know of credit unions who have installed steps up to their teller windows to allow young people to reach the counter for their transactions. I challenge you to “step-up” to financial education for your members, one way or another. Take a look at your educational advocacy. Ensure you have plans in place to further the knowledge of your members. Allow them to make informed choices of the financial products and services which are right for them.
Credit unions have not only provided consumer financial products, but have also provided the education and guidance for their members to use those products. Today, millions of people across the United States are outside the financial mainstream. The so-called "unbanked" - with little or no banking experience - are often newly arrived immigrants, minorities and those with low to moderate incomes. Because they may lack a basic understanding of how money works in our society and the tools necessary to save and manage money, they are deprived of achieving the American Dream and financial independence. Promoting the financial education of our underserved strengthens our society as a whole. I especially encourage low-income designated credit unions to consider developing financial education programs, accessing the technical assistance grants NCUA has available for such efforts. Knowledge and communication of financial services through financial education will give members the power to make choices in their lives to strengthen themselves, their families, and their communities.
What lies ahead for the credit union industry? Credit unions have a very strong foundation upon which to build. With over $610 billion in credit union assets, the industry has realized tremendous growth over the last several years. Capital remains solid and we are pleased to know of the trust and confidence today’s membership has in America’s credit unions. Your continued diligent risk management is imperative as you grow and become an even greater financial partner for your members.
This morning, I challenge you to ask yourselves “Where do you go from here?” Planning for the future is an arduous, but exciting task. Look today at who will lead your credit union in the future. Continue to ask how you can prepare the next generation for the challenges ahead. Explore how you can maintain your trusted relationship with your members and continue to build for future growth. Identify the issues that will be on the horizon. Vision is important for us as an agency and for you as credit union leaders. I will continue to work for a regulatory environment founded on safety and soundness and providing earned flexibility. I will work to enhance communication, soliciting feedback on how our regulations are impacting those we regulate. You will be encouraged to plan for future leadership positions, to look for innovative ways to serve your members, and to improve financial literacy opportunities. You need to continue to ask how you can prepare the next generation for the challenges you anticipate.
Though the regulator and the regulated may not always agree, I can assure you that your voice will be heard. At NCUA, safety and soundness is our number one priority. We are here to work with you to ensure you have clear and straight forward information with which to make important decisions. Together, we are stewards of the industry.
Thank you and I wish you a most productive and successful conference.