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CHICAGO – John Bley, CEO of IntegraAdvisors LLC, continues to be impressed with credit unions and the way they deliver services to their members. “But for the (credit union) industry to continue that kind of vibrancy requires a mutual relationship with innovative regulators,” the state of Washington’s past Director of the Department of Financial Institutions told attendees of NASCUS’ annual conference. “An industry can’t be innovative if its regulators aren’t also innovative,” said Bley who cited various “mega-trends” in the credit union industry – the number of federally insured CU is trending down, total membership continues to increase, the number of problem credit unions is trending up – and discussed their implications on CU governance issues. Credit unions need to ask themselves if their boards can recognize a potential problem when they see it, and do they have the resources to deal with the problem effectively, he advises. “The biggest threat to the state-chartered credit union system isn’t from outside federal regulators or the NCUA, it’s from within. It’s finding departments at the state regulatory level and making sure there’s greater retention and recruitment and keeping quality people at the state level,” he said. “If you go through the records you can see where regulators were raising issues, but the board didn’t respond to the issues,” he continued, adding that that begs the question, “Did they understand the gravity of what was being said.” When considering the basic principles of regulation, Bley says it’s key for credit unions to remember that, “The market place is the number one regulator of financial institutions. Boards are the number two regulator. “Regulatory expectations are always the minimum. Board expectations should be higher than the minimum,” he added. “Risk based supervision starts with effective board governance. It should be sound public policy to promote the business plan of well-run institutions and for regulators to deal surgically with problem institutions and if necessary, progressively if the problems continue.” Bley emphasized that, “Risk based supervision starts with a review from the top. It’s the board’s responsibility to oversee the management of that risk. But remember that just because someone is a good manager in their field doesn’t make them a good board member. The legal duties of directors requires them to be able to put the interests of the credit union ahead of their own interests.” [email protected]

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