The regulatory burden on credit unions is crushing. What has been difficult is trying to put a dollar figure on just how much regulation is affecting the credit union industry. CUNA recently commissioned an independent third party study on the regulatory burden and found that in 2014 it took a $7.2 billion toll on credit unions. That number breaks down to $6.1 billion in regulatory costs and another $1.1 billion in lost revenue.
The study broke down the numbers to show that regulatory costs are 17 percent of a credit union’s operating costs, 90 percent of office operations, and 34 percent of comp and fringes. Looking at the $7.2 billion impact, it breaks down to having a 19 percent effect on total interest income, 48 percent impact on non-interest income, and 80 percent effect on net income. As you would imagine, the greatest area affected in the credit union is staff costs. The study found that a regulatory cost on staff time was about 74 percent. This was for risk management, member-facing, and support employees. Another way to look at it is one in four employees time is spent on regulatory compliance.
The study further looked at how regulatory burden has increased in the past five years. Credit unions have seen a $2.8 billion increase in regulatory costs since 2010. As you would imagine, small credit unions feel a larger effect than larger credit unions. The financial impact is three times greater at smaller credit unions than at larger ones. If the regulatory burden and costs were eased, CEOs indicated in the study that they would put those resources toward enhanced alternative channels, building more capital, and staff development.
CUNA will have much more on the regulatory burden study during the CUNA GAC in late February. It will also be broken down by state to have a greater impact on lawmakers during Hill visits. Read more on CUNA’s website.