As Prepared for Delivery on March 1, 2022
Thank you! It’s great to be here – it’s great to be anywhere. Thank you, Antonio, for that warm introduction, and thanks to you and your team for putting on a terrific convention. This is my first in-person GAC. And I get it now. I get why I’ve heard so much about GAC and why it’s such an important event for the credit union movement. We all did the best we could with virtual meetings, but hasn’t this week just illustrated that face-to-face still matters?
It’s fun to see people again. In fact, the last time I was at this convention center was one year ago this week, when this building was temporarily D.C.’s largest vaccination site. This is better.
I have two main points to make in this speech, but first, I want to address something that’s on a lot of people’s minds. A few days ago, I met with the great folks at the Ukrainian American Credit Union Association. They work with the 12 Ukrainian credit unions in the United States, and their members obviously are going through a tough time trying to help friends and family back in Ukraine. Our thoughts are with them and with the 300 credit unions in Ukraine. With us today are executives from three of the Ukrainian American credit unions: Anatoli Murra, Vitaly Kootnee, and Andre Vignanski. Gentlemen, do you mind standing up so people know who you are? The NCUA is here to help, and I thank you for the work you’re doing right now.
Now, on to today’s business. You’ve already heard from my esteemed colleagues, Chairman Harper and Board Member Hood, and they’ve detailed how credit unions are coming out of the pandemic in a pretty healthy condition. You’ve done the work to get through a situation that was definitely not in the manual.
Earlier today, Board Member Hood spoke about the importance of innovation, and credit unions have innovated for years to meet their members’ ever-evolving financial needs. You all know that the only constant is change and that standing still can be riskier than experimenting with new ways of doing things. And to assist with that innovation, I’d like to make two points.
First, we at the NCUA know that we also have to evolve with the times to provide quality service as your regulator and insurer. My second point is that cryptocurrency, and the related blockchain technology, just might have a profound, disruptive impact on financial services that equals the effects of the internet. Thus, my true north as a regulator is ensuring that credit unions don’t go the way of Blockbuster Video because their regulator didn’t provide them the clarity needed to compete.
Regarding the first point about the NCUA evolving to provide better “customer service,” I’m pleased to announce a couple of initiatives that you’ll recognize from the private sector and some forward-looking governments. The recording of credit union exit exams and our pilot program where there’s immediate feedback surveys after exams, kind of like Uber or Doordash.
Recording of examinations provides a useful record for both the NCUA and credit unions. It’s easy to do these days, common at companies like Marriott. And even my local government here in the District of Columbia, which is nobody’s idea of enlightened governance, when I call them, you hear, “this call is being recorded for quality assurance.”
And our post-examination feedback survey pilot program launched at the end of 2021, and we want your input. There are five questions that are designed to communicate the NCUA’s priorities, such as “was everything put in writing?” And the last question is, “what other questions should be on the survey?” This stuff should reduce miscommunications and be a godsend for new NCUA examiners and new credit union CEOs.
My fellow Board Members and NCUA’s career staff have been great to work with on these initiatives. We’re all dealing with the same core issue that affects government agencies all over the world: We’re basically a monopoly provider of our services, and monopolies often wind up producing mediocre products at high prices. It’s not anyone’s fault that we aren’t exposed to market forces — it’s sort of the nature of the beast.
So, by implementing normal, modern customer feedback and transparency, the agency you pay for ought to be an improved regulatory experience. So, we know that NCUA has to modernize as well. I know I wouldn’t want to hear about modernization from an agency whose rules still reference fax machines.
To my second and final point: let’s talk about crypto and blockchain. Many people in that world feel the traditional finance system will lose out to this new decentralized finance. They call legacy banks and credit unions, “TradFi,” and say it will lose out to, “Defi,” or decentralized finance. From now until my term expires in 2025, let me share the truth-north that guides me: I don’t want to see credit unions slowly go the way of Blockbuster Video because their regulator wouldn’t let them compete.
I’m pleased to say that in December, the NCUA put out our first piece of crypto guidance, and projects launched into action. The guidance is about partnering with crypto exchanges. It came about because two things came together. First, credit unions saw all the outflows to Coinbase and other crypto exchanges. Second, the vast majority of people say they’d prefer to use their existing financial institution. So, we put out guidance, and now there’s a new source of non-interest income.
And one thing I want to say to credit unions is I don’t think you need to worry about the technical side of this. Vendors are going to offer you services that should be better, cheaper, faster, more secure. Most of us don’t have to know all the details. Look at it this way: Most of us still have no idea how the internet works. And if you could speak to your younger self from 20 years ago about smartphones, you wouldn’t tell them about satellites and telecom spectrum. Instead, you’d say, “It’s so cool. When I need a ride, I press a button, and a guy in an Elantra takes me home.”
This all may be similar to 20 years ago with the internet — credit unions will do the same functions they always did, just via a new method. Vendors offered you new ways to do payments, give account statements, tax forms, custody of assets, etc. Credit unions have innovated for years, and they will do so again.
There are two reasons why I care about this so much: First, I’m a fiduciary of the $20 billion National Credit Union Share Insurance Fund, and that’s your money, not NCUA’s, so I wouldn’t be doing my job if I didn’t help you guys do what you need to do to compete. The second reason is that we need to publicize that credit unions are a market for potential vendors, Silicon Valley, and venture capital investors to think about. One hundred and thirty million Americans, $2 trillion in assets, that’s a good market to partner with and make products for.
If we do this right, we’ll have a lot of good news when we meet at GAC 2023.
Thank you, CUNA, and I appreciate the chance to speak with you all for a bit.