WOCCU Hong Kong Conference Looks Warily at Likely New Regulatory Push

HONG KONG -- WOCCU launched the 18th annual World Credit Union Conference in Hong Kong on July 13 amid the pageantry that has come to customize the opening of these meetings.

But even as leaders on site offered welcomes and an agenda dominated with credit union and development issues, problems in world financial markets and China's looming opportunity and challenge remained on leaders' minds.

John Tsang, financial secretary for the government of the Hong Kong Special Administrative Region and the highest financial service regulator in the region, welcomed the conference attendees. Tsang keyed his remarks off the 2008 Olympic Games, which begin Aug. 8 in Beijing. Reminding the attendees that Hong Kong will welcome the Olympics' equestrian events as part of the games, Tsang outlined the strengths that make Hong Kong a strong competitor for financial services in China.

Among these, Tsang said, were good governance, a largely open and transparent financial system, a willingness to innovate in products and services and an overall lower regulatory burden. Tsang remarked that the conservative Heritage Foundation in Washington has consistently named Hong Kong as the world's freest economy, explaining that the region has no value-added tax, no tax on income not generated in Hong Kong and a top income tax rate of 15%.

Further, the lack of a capital gains tax has been instrumental in helping Hong Kong attract foreign capital to the point where it has become the third largest stock market in the world, behind only London and New York, he explained.

"Hong Kong's geographic position and its history give us a unique position to offer the world a strong financial services alternative," Tsang said.

Tsang praised Hong Kong's financial innovation in particular as offering hope for China overall as the sector struggled to bring retail and business banking services to the broader country.

If there is a down side for credit unions in all this, it may be that the financial sector's strong success in banking, combined with Hong Kong's traditionally customer-service oriented business culture, has made it difficult for credit unions to find a niche in the market.

In his comments, Charles Yip Wai-kwong, president of the board of the Credit Union League of Hong Kong, added to these remarks, reminding attendees that although Hong Kong's 41 credit unions have only 1% of the region's population, the league has been working hard to promote the credit union philosophy in what Yip called mainland China.

"Mainland China is undoubtedly the base of what is potentially the largest credit union movement not only in Asia, but also the world," Yip said. He explained that several Hong Kong credit unions have entered into different development projects with communities in China to help introduce residents to financial cooperatives.

Hong Kong credit unions' problems with penetration are echoed in the region, Yip said. While having one of the highest overall number of credit union members in the world, Asia still ranks as having one of the smallest percentages of credit union members in the world.

Meanwhile, other world credit union leaders have also been considering the potential impact of the current instability in world credit markets, particularly in the U.S.

The World Council of Credit Unions Chairman Melvin Edwards explained that he fears the current period of instability in many of the world's financial markets less than a regulatory backlash that might follow.

After welcoming attendees to the conference, Edwards noted how leading U.S. regulators have already begun laying groundwork for increased regulation, citing the extraordinary circumstances facing the U.S. financial services industry.

"The problem with the kinds of regulation that arise in situations like these is that they sweep up the innocent with the guilty," Edwards said. "Credit unions have not been involved in these problems, yet a blanket regulation will cover them as well."

Edwards acknowledged that the variety of nations and languages represented at the conference demonstrated the global appeal of credit unions. He characterized that appeal as resting upon the idea of a source of financial services and development that does not rest in government or the private sector but in cooperation among people.

In his comments to the attendees, Edwards said the single most unifying thread that ties credit unions together around the world together is their shared commitment to providing the best possible service to their members.

--dmorrison@cutimes.com