ALEXANDRIA, Va. (July 29, 2020) – The COVID-19 pandemic and the national dialogue on the issues of diversity, equity and inclusion provide credit unions with an enormous opportunity to rise to the occasion to support their communities and members, National Credit Union Administration Chairman Rodney E. Hood said today.
“For credit unions, in particular, these events have taken on added significance because they highlight inequities that have long existed within the communities they serve throughout the United States,” Chairman Hood said. “The industry’s mantra of ‘people helping people’ can also serve as a useful moral guidepost for how we can transform today’s challenges into an opportunity for understanding, inclusion and healing.”
Hood delivered the keynote address at the 43rd Credit Union Leadership Convention. His remarks, which were delivered virtually, are available on the NCUA’s website.
State of the Credit Union System
During his remarks, Hood discussed the state of federally insured credit unions since the pandemic began earlier in the year. Measures taken to combat the virus’ spread have resulted in historically high unemployment rates, he said. Hood noted that although there is evidence of an economic recovery, the NCUA anticipates that credit unions will experience higher delinquency rates as consumers and credit union members respond to the pandemic’s economic and financial effects.
“The near-term economic outlook is somewhat challenging, and I encourage credit unions to monitor economic and financial developments,” he said. “Though the months ahead will undoubtedly challenge the credit union system in unprecedented ways, it’s important to remember that credit unions have historically played a vital role in helping their members — and by extension, their communities — succeed financially.”
CECL Could Have a “Chilling Effect on Lending”
Hood also expressed his concern that requiring credit unions to comply with the Financial Accounting Standards Board’s current expected credit losses methodology could affect credit unions’ ability to serve their members during the current pandemic.
“Even before the current pandemic, credit unions had approached the NCUA with concerns about the unintended consequences of implementing the new accounting standard,” Hood said. “In our current environment, I am especially concerned that adopting CECL will have a chilling effect on lending, including loans to low-income borrowers.”
Hood continued to urge FASB to grant credit unions a permanent exemption from CECL. However, he noted the NCUA Board has the authority to provide some relief to credit unions to minimize the standards effects.
“The NCUA Board will consider, at its meeting tomorrow, proposed regulatory amendments that will mitigate the adverse consequences of the capital adjustments resulting from CECL,” Hood said. “The Board will also exercise its statutory authority to exempt small credit unions with less than $10 million in assets from generally accepted accounting principles.”
A Sustained Commitment to Diversity, Equity and Inclusion
Hood also discussed the importance of the principals of diversity, equity and inclusion, which he said must inform all of the organization’s strategic planning and operations.
“Unfortunately, organizations and executive leaders far too often treat diversity as simply a ‘human resources’ issue,” Hood noted. “To be truly effective, though, diversity requires a commitment to cultural change at every level and must extend throughout the organization. It cannot simply be a matter of “checking the boxes” to show that you’ve got the right proportional representation of women, people of color, and LGBTQ+ people in the C-suite or on a corporate board.”
For the financial services industry, diversity is essential when it comes to reaching and serving a wider range of people, Hood said. He urged industry leaders to consider diversity in broader terms and challenged them to make an authentic and sustained commitment to financial inclusion.
Specifically, Hood stressed that leaders should ask:
- Are we doing everything we can to reach people with low and moderate incomes?
- Are we including disabled and differently abled individuals in our financial inclusion plans?
- What about people in hard-pressed urban communities or in distressed rural communities where financial service options are increasingly limited?
“Each of us should be thinking critically about these and other questions because they are at the core of true financial inclusion,” Hood said. “The financial services industry has shown great creativity in developing new types of products, but we haven’t always directed those creative energies toward the people and communities who need help the most. And that’s important because what truly matters is the impact we’re having on real people.”