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MONTEREY, Calif. – Credit unions must address six key issues that will determine the future of the industry, said former NCUA Chairman turned consultant Dennis Dollar at the California Credit Union League’s Big Valley Educational Conference. Dollar’s six key issues include capital modernization, marketplace competition, cooperation among credit unions, the viability of the credit union charter, legislative activism and consumerization of membership. Dollar’s list summed up what appears to be 2006′s hottest topics, as several other speakers covered the same topics at the three-day event, particularly capital modernization, advocacy and charter conversions. “In the next five to 10 years, every credit union will have to face the choice to succeed within the credit union charter, or switch to a bank. Our challenge as an industry is to find a way to make the credit union charter so valuable, credit unions don’t have to consider other options,” Dollar said. Dollar, who knows a thing or two about credit union regulation, said the current regulatory environment impedes credit unions’ ability to make innovations necessary to compete in today’s marketplace. In order to make the credit union charter a viable structure, regulators need to make adjustments to deal with tightening margins and increased member demand for products and services, provide field of membership diversification options, and respect growth as evidence of a credit union being responsive to its members’ needs. “Over-regulation in lending, investment and fee income options will make it impossible for credit unions to grow and remain safe and sound,” Dollar said. Dollar also touched upon field of membership, calling for regulators to allow credit unions to develop more diversified field of membership options. “Field of membership isn’t just about growth, it’s about diversity. If the plant shuts down or the base closes, credit unions need a way to survive,” Dollar said. While discussing advocacy, Dollar touched upon the NCUA’s current data collection initiative, saying the industry should take the lead in quantifying the difference it makes in the lives of underserved Americans. “Wouldn’t it be nice if we would walk into a Congressman’s office and say `Congressman, I don’t know about anybody else, but this year we made 1,346 loans to members making less than $30,000 a year, and these voters all live in your congressional district’,” Dollar said. He also challenged credit unions who believe advocacy is too expensive, pointing out how much they have spent complying with recent regulatory requirements like the Bank Secrecy act, the Patriot Act, the FACT Act and Check 21. Dollar also beat the risk-based capital system drum, estimating that if credit unions measured their capital ratios the way banks do, the industry’s current average of 11% would be instead be 17%. “Wouldn’t you adopt a totally different strategic approach with a 17% capital ratio?” Dollar asked the audience of senior executives and volunteers. Using the oft-used phrase “co-opitition”, Dollar said credit unions must work together as they compete in order to sustain the industry. “I predict shared branching will be one of the things that credit unions will use to differentiate themselves in the marketplace,” Dollar said. -

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