Happy New Year to all who embrace the cooperative principles!
We are now less than one year away from the start of the United Nation’s International Year of Cooperatives and one way I believe that credit unions (as financial cooperatives) can prepare to celebrate this once-in-lifetime event, should be in association with the new financial literacy rule on federal credit unions.
The details of the rule (recently outlined by CUNA) state that the NCUA wants to ensure that federal credit union directors have a sufficient working knowledge of their credit union’s financials going forward. The mandatory level of financial literacy expected among the directors will depend upon the complexity of each individual credit union’s balance sheet.
The regulation requires that directors:
· Have at least a working familiarity with basic finance and accounting practices
· Have the ability to read and understand their credit union’s balance sheet and income statement
· Be able to ask, as appropriate, substantive questions of management and the internal and external auditors
The regulation will become effective Jan. 27, 2011, and compliance with the financial literacy portion of the rule will be required by July, 27 2011.
So you guessed it. The mad rush is now on to provide training to credit unions that will help them be in compliance with the ruling. CUNA, NAFCU and the leagues are all lining up to help. But in doing so, I wonder if the providers might also be missing a great opportunity?
What good is it if credit union directors have the ability to make sense of the balance sheet if they don’t understand the philosophy that governs it?
If it’s true (as I’ve been told by many CEOs themselves) that a majority of those who serve on credit union boards don’t have a clue about the principles defining a cooperative business model, then all I can conclude is that providing balance sheet training without including a study of cooperative philosophy will make credit union directors no different from their counterparts sitting on the boards of local community banks or quite possibly the boards of Wells Fargo, Citibank and Chase as well.
As you can see, I believe that with this new ruling by NCUA comes a great opportunity for the movement to also educate directors on what it means to be a credit union and what defines the credit union business model. By providing such education along with training on balance sheet mechanics, we will not only strengthen our cooperative ethos but also create a more conducive environment for celebrating the International Year of Cooperatives in 2012. We have a great opportunity to do it right!