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Vice Chairman Hood Highlights Shared Vision and Common Goals in Address to Bankers Convention

June 19, 2006, Alexandria, Va. – Believing that the acrimony between bankers and credit unions is due to a lack of understanding of credit unions, National Credit Union Administration (NCUA) Vice Chairman Hood reached out to the banking community in a speech today at a banker’s convention, which is unprecedented in recent memory. In his speech to the 110th Annual Convention of the North Carolina Bankers Association, Vice Chairman Hood emphasized the important role credit unions and banks have in strengthening the economy and highlighted their shared vision and common goals.

“I firmly believe that credit unions and banks have a shared vision and common goals,” said Vice Chairman Hood.  “In today’s dynamic financial marketplace, credit unions, banks, and thrifts share a vision for successfully managing regulatory burdens while seeking to provide financial products and services to consumers in a cost-effective manner.”

Vice Chairman Hood specifically noted several common goals including regulatory relief; strengthening communities by protecting Americans from predatory lending, and promoting homeownership and entrepreneurship; data security; consumer education regarding the recent insurance fund changes; and support for the dual chartering system.

In his remarks, Mr. Hood stated the shared vision and common goal of ensuring regulatory relief and summarized the two guiding principals of his regulatory philosophy. “As a regulator, I have two guiding principles: Regulation needs to be effective and not excessive; and we are to manage risks and not avoid them.”

“Banks and credit unions clearly have a shared goal in supporting regulatory relief. It is a challenge for bankers and credit unions to respond to the steady stream of new regulations while continuing to comply with existing ones. Regulation changes, especially for smaller credit unions and smaller community banks with limited staff can be quite costly since implementation often requires computers to be reprogrammed, staff retrained, manuals updated and new forms produced. “

Vice Chairman Hood discussed the new regulatory environment credit unions and banks may experience due to the terrorist attacks on September 11, 2001 and the global war on terrorism. “There is no doubt in my mind that financial institutions and the regulators must be vigilant in their efforts to implement the Bank Secrecy Act in order to prevent terrorist financing efforts and money-laundering, “ stated Vice Chairman Hood. “Banks and credit unions file millions of Currency Transaction Reports and nearly 500,000 Suspicious Activity Reports with the Financial Crimes Enforcement Network. I would like for banks and credit unions to explore ways to make this system more effective for law enforcement, while at the same time making it more cost efficient and less burdensome.”

Vice Chairman Hood also raised awareness of the financial impact regulations have on financial institutions and stated his belief in maintaining the balance of cost and regulation. “It is important that financial regulators balance the cost and benefits of regulation,” stated Mr. Hood. “Statutes and regulations help preserve confidence in the banking industry and in the financial markets by ensuring that institutions operate in a safe and sound manner. Our current system helps restrain imprudent risk taking and protects important consumer rights. However, as more and more laws are passed, and new regulations are adopted to implement those laws, it is incumbent upon policy makers like me to ensure that the intended benefits justify the considerable costs.”

Vice Chairman Hood praised the shared goals and vision that credit unions and banks have in strengthening the community and highlighted three areas of importance: protection from predatory lending, business lending, and homeownership.

 “Financial services providers are only as strong as their weakest community, “stated Mr. Hood. “As you are all aware, predatory lenders tend to establish outlets in poor communities that have watched economic progress from the sidelines. Those communities that have banks and credit unions are able to provide consumers with mainstream financial products and financial literacy that afford  them access to achieving the American dream of homeownership, financing cars, sending children to college, and saving for their family’s future.”

Vice Chairman Hood also emphasized the importance of protecting members of the Armed Forces from predatory lending. “As home to a very large military base, North Carolina’s credit unions and banks have worked successfully in tackling predatory lending. Through the support of Senator Dole and the commitment of the NC legislature, our young enlisted men and women will no longer become victims of high-priced predatory loans. Having recently attended a meeting of the Credit Union Defense Council, I am pleased to report that I have asked the Director of Military Banking to join me in creating a specific financial education materials designed specifically for military personnel.”

Hood highlighted how banks and credit unions share the same vision of strengthening America’s economy by providing capital to small businesses. “Small businesses with fewer than 500 employees account for 75% of all new jobs created in this country,” said Vice Chairman Hood. “As a former commercial lender, I know firsthand that banks and credit unions also strengthen communities through providing capital to small business owners, and have played a pivotal role in helping create the largest number of small business owners in history.”

Hood also commended credit unions and banks for their shared goals and vision for increasing homeownership in America. “I have also seen firsthand the role that credit unions and banks play in extending capital for affordable mortgages. Thanks to effective marketing, financial education, and product innovation, banks and credit unions have helped Americans achieve the highest homeownership rate in history.”

During his speech, Vice Chairman Hood identified the necessity of credit unions and banks to share the goals and vision of working hard and exercising vigilance to protect the security of financial data and identity. “In today’s marketplace, ATM cards, debit cards, and credit cards are now standard products which banks and credit unions offer,” said Mr. Hood. “Unfortunately, the freedom of the cashless society has been violated. Data security breaches threaten to erode the trust consumers have developed in the electronic payment system, if not detected promptly, prevented where possible, and mitigated when breaches do occur. “

Vice Chairman Hood noted the financial toll that financial security breaches take on credit unions and banks. “Banks and credit unions stand to lose significant amounts of money if this issue is not addressed. Total costs for banks and credit unions to recover from a data breach average $140 per lost customer record The Federal Trade Commission (FTC) estimates that 10 million Americans fall victim to identity theft each year, a number that has been rising for four years. The data security issues are too profound to ignore and too enormous to solve without collaboration. I invite you to join the credit union community in addressing data security and credit card fraud so that the health of America’s financial system remains strong and vibrant. Money center banks on Wall Street and credit unions and community banks on Main Street are all vulnerable to the financial risks and reputation risks that accompany fraud.”

Vice Chairman Hood praised President Bush for signing the federal deposit insurance changes into law, and emphasized the importance of both credit unions and banks to properly inform the public regarding these changes. “I believe that banks and credit unions will all have to work diligently in educating consumers about these new changes. In fact I sat with an economist on a flight following the press release and he thought all of his accounts would be insured to the new level.”

Vice Chairman Hood also highlighted the value of both credit unions and banks to support the shared goals and vision for the dual chartering system. “Like many of you, I believe in the integrity of the dual banking system and dual credit union system.  Just as consumers should have the ability to choose which financial services provider can best meet their needs, banks and credit unions should have the same freedom and empowerment to choose which charter best suits their philosophy and business objectives.”

Vice Chairman Hood praised the work of the NCBA and stated his optimism for credit unions and banks to continue their role in strengthening America’s economy and helping consumers achieve the American dream. “Having worked in financial services for almost twenty years, I have seen firsthand the unique role that credit unions and banks play in today’s dynamic marketplace. Consumers are the true beneficiaries of a robust banking system and a vibrant credit union system.”

The National Credit Union Administration is the independent federal agency that charters and supervises federal credit unions. NCUA, with the backing of the full faith and credit of the U.S. government, operates the National Credit Union Share Insurance Fund (NCUSIF), insuring the savings of nearly 85 million account holders in all federal credit unions and many state-chartered credit unions. NCUA operations are funded by credit unions, not tax dollars.