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NAPERVILLE, Ill. – As the new director of strategic services for the Illinois Credit Union System, Patrick Smith sees several pressing issues that need to be addressed. The most pressing, says the former supervisor of the Illinois Division of Financial Institutions’ (DFI) Credit Union Section, is “to ensure that a competitive and fair regulatory fee system is in place that assures competent regulatory oversight without diverting credit union regulatory fees to unrelated interests.” “In Illinois, it is imperative that the credit union system that has flourished in the past continues to do so in the future … Illinois state-chartered credit unions have worked hard to establish and take great pride in the fact that a self-funded regulatory environment exists.” Smith, who was with DFI for more than 17 years, first as an examiner and then as supervisor of the credit union section, says two other top issues are: * Survival of single-sponsor credit unions in the current economic environment. “Many credit unions, both large and small, are faced with primary sponsor plant/business closings with very little warning. A major challenge is to continue to respond effectively to these institutions by assisting with diversified business plans in a timely manner. Maintaining the viability of these credit unions should be a primary objective with the merger option only being used as last resort.” * Establishing business and operational structures that are appropriate for the current low-interest-rate environment while maintaining a sound strategy to maintain profitable operations when interest rates eventually rise. Credit unions as well as all financial institutions have incurred an extremely low cost of funds/dividends over the past 10-plus years to the extent that some may take for granted the continuance of this cost structure. It is extremely important that credit unions do not get caught off guard in the area of funds management in a rapidly rising rate scenario.” In his new position, Smith’s responsibilities cross corporate and several departmental lines. He will perform duties related to functions of the Illinois Credit Union League (ICUL), including governmental relations, technical and compliance support, member service, educational development, and regulatory consulting as well as provide internal audits of various products and programs of the ICUL Service Corporation. In his governmental affairs capacity, Smith will assist in developing the league’s annual legislative and regulatory agenda. He also will assist in gaining access to key constitutional officers and legislators to formulate legislative and rule-making strategies to help ensure that the interests of ICUL and its member credit unions are properly served. Regarding the league’s legislative and regulatory agenda, Smith says that he sees that “without a doubt, the top issue is to maintain a competitive and fair regulatory fee structure in Illinois that assures that the newly formed Illinois Department of Financial and Professional Regulation is well funded to perform its regulatory oversight mission of Illinois state-chartered credit unions. The main issue is to ensure that regulatory fees paid are directed to their intended purpose of preserving and maintaining credit union safety and soundness and not diverted to fund other non-related areas of government.” In regard to regulatory, compliance and technical issues, Smith will provide specific assistance such as compliance review audits and related education and training in several venues to advise credit unions of trends in credit union operations and help develop corrective plans to address specific operational challenges. “One of the biggest credit union operational challenges that I noticed in my former role as state regulator was the task of maintaining a proper balance with compliance issues and the fundamental goal of serving the field of membership. Management’s desire for maintaining a high regulatory composite rating and at the same time offering the products, services and rates desired by the membership would often conflict. It is my goal to assist credit unions in achieving and maintaining the proper balance needed to effectively serve their members without compromising overall safety and soundness.” As a former credit union regulator, says Smith, he realized the value of flexible, business-oriented provisions for field-of-membership expansion. “Many credit unions cannot survive without diversification options being available and attainable in a timely manner. It is my goal to guide credit unions in the areas of field-of-membership expansion as well as offering regulatory technical support that is required when credit unions go from a basic business plan to a full spectrum financial service-oriented program that brings with it a multitude of regulatory complexities. Smith says mergers continue to dominate the credit union landscape. Assets and membership numbers are growing within a system of far more complex credit unions and fewer credit unions overall. Smith says that when he started his career as a credit union examiner in 1987, Illinois had more than 900 credit unions. Today, only half of these credit unions remain. “In my last year with the DFI, mergers were occurring at an average pace of two a month despite regulatory and industry efforts to assist these credit unions in maintaining viable operations.” “As a state regulator for many years, I had the privilege of working with many fine individuals on all levels of the credit union system. As I expand my career in this new role, it is my objective to extend upon these relationships and offer my technical assistance and support to the many great people and credit unions that make up this industry.” -

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