The debate over the fate of small credit unions continued onCUinsight's blog last week with Henry Meier of the Credit Union Association of New Yorkinterjecting that “the days of treating your examiner as your defacto compliance officer are over.” It's not that examiners want toput small credit unions out of business.

The reality is that running a financial institution in the 21stcentury is more complex than in the past and the connectivity ofthe information age presents greater risks, such as leaked privateaccount information, and that requires more regulatory oversight.Compliance is the cost of doing business and if you can't bearthose costs, you won't be in business.

Credit union professionals are primarily numbers people so I'lllay it out for you that way. Your $10 million credit union's smallstaff responsible for complying with gazillions of regulations andanticipating a bazillion more while adding copious technologicaladvances. Multiply that by exponentially growing member demands.Extrapolate that out to one very stressed CEO who's just five yearsor less from retirement, throw in a harried operations manager andfind the cosine of three overworked and underpaid member servicereps. I'm reaching for a salty margarita just thinking aboutit.

Gregg Stockdale, CEO of the $34 million 1st Valley Credit Union,wrote in reply to Meier, “We have seen an exodus of the entitlementcrowd from our ranks, but that does not mean the end of small CUs.”He is correct. Size is less important than will and know-how. Largecredit unions have failed for lack of these characteristics, butmany small credit unions thrive because of them.

Not all examiners are great, no doubt. Bad apples exist at theregulators just like anywhere else, but think for just a minutefrom a different perspective. Is it really that examiners are tooharsh now? Or were they too lax before? The ranting from manycredit union executives that came out after WesCorp's demisecentered on the lack of oversight by the NCUA and directors, amongothers. Now the agency is cracking down as requested and some ofthe same executives are complaining about that too.

Check out Ed Speed's thoughts on page 12 of our Nov. 18 printedition concerning the regulatory environment. While retaliatory behavior obviously exists in some cases, and manycredit unions aren't going to win exam appeals, that doesn't mean the regulators are necessarilywrong on the whole.

I'm not a fan of big government in general but enforcing what'son the books to ensure consistency of application is important.Regulatory bodies, such as the Consumer Financial ProtectionBureau, came about specifically because existing regs were notupheld. In 2010, The Safety & Soundness Reportuncovered that 75% of credit unions were operating under a document of resolution.

Though the NCUA performed a complete 180-degree turn in responseto the economic and financial crisis, as many regulators did, Iwould suggest that most were justified but simply hadn't beenenforced previously. The about-face was enough to give creditunions whiplash, but now that we have landed in the muck, it's timeto slog through it.

All interested parties need to come together to understand thewhens and wherefores of the examination process and outcomes fromhere. Credit Union Times would be pleased to facilitatethis type of effort and is working in that direction.