A Humorous and Factual Look at This Week’s Start of the Chinese New Year, from CEO John Annaloro

Monday, Jan. 23, marked the start of the Chinese New Year—and 2012 is the Year of the Dragon.

In reviewing the literature, it appears that if born under this sign, you hold auspicious powers and are a symbol of good fortune, just like the credit union itself. Dragons are also known to be free spirits who rarely follow rules and regulations. Rules and regulations are made for other people. Restrictions blow out the creative spark that is ready to flame into life. Accordingly, if you have regulators in your credit union today, think about surprising the examination crew with firecrackers. It is not only a tradition—call it part of the rules.

At the Northwest Credit Union Association, we will be collaborating throughout this year with the Washington DFI, Oregon DCBS, National Credit Union Administration (NCUA) and Consumer Financial Protection Bureau (CFPB) on the cumulative regulatory burden on Northwest credit unions until some meaningful reforms and limits are in place—before our creative spark and CU Return to Members gets extinguished. In addition, the Association’s push for expanded powers will help your institution keep pace with the evolution of the financial services industry. This is our New Year’s resolution—and part of the Association’s Strategic Plan.

Right now we are working in the Oregon and Washington state legislatures to mitigate the impact of foreclosure bills that could be costly to credit unions as lenders. In Oregon, we are helping shape new rules for elder abuse in financial crimes, and we are seeking to advance prize-linked savings programs as an option for credit unions—but last week, the legislative counsel in Salem threw a state-constitution roadblock in front of it, saying it is too close to a “lottery” to move forward. Creative legal thinking is being applied. In Washington, meanwhile, the public funds housekeeping bill has successfully passed through its first committee hearings.

Of course, there is much going on with federal issues, too. But as of today, the new news for those traveling in March to the Credit Union National Association (CUNA) Government Affairs Conference in Washington, D.C., (and more than 100 of us from the Northwest are already registered) is that our scheduled CUNA dates overlap exactly with the American Bankers Association’s Government Relations Summit. Accordingly, you can expect Oregon and Washington bankers to be on the Hill at the same time as you. Our talking points for members of Congress at this event will include one or two of the bankers’ legislative issues. Like the Chinese Dragon’s belief that “rules and regulations are for other people,” it was the banks that caused the financial crisis and recession, not credit unions—and that is where the increased federal regulatory focus needs to take place.

Overall, your regional Association is off to a good start this year. All of this is a clever way of saying we are already fire-breathing on your behalf. I hope 2012 brings you and your credit union a year of prosperity and good fortune.


Gung Hay Fat Choy, from all the staff at NWCUA,


John Annaloro, CEO


PS: Yes, there are credit unions in China. Lots of them. Studies suggest their “movement” started in the 1950s, and by the early 2000s, there were 42,000 natural person credit unions (NPCUs) employing in total approximately two-thirds of a million staff members. Like here, credit unions in China were created to combat usury and promote local financial stability. Market share of all Chinese retail banking assets is about 10 percent, compared to the U.S. historical market share of 6 percent.

For decades under centralized communist power, the credit unions were managed by four Chinese national bank entities, People’s Bank of China (PBOC) and Agricultural banks. In the 1990s, a major reform took place to separate them all from the Ag banks, and to restore their nature as independent rural credit cooperative financial institutions (RCC’s).

Because of historic and sweeping socio-economic changes in China, and the move from state-provided work and welfare to a modified capitalism structure, demographic resettlement contributed to the credit unions’ long-depleted capital and running an annual 6-to-7-percent charge-off rate, making them nearly unsustainable. To facilitate the updating of the system 10 years ago, the Chinese government began building a new regulatory and structural system. In addition, China’s credit union system needed to be quickly expanded with a vision that included thousands of new institutions designed for the many new cities throughout the region. The scale encompassed for cooperative financial institution development in China is unmatched in historical scope.

Urgency was necessary since individual financial access was nearly nonexistent and usurious lending is rampant. By 2006, the Chinese government established a new legal framework for the existence of credit unions, including financial assistance and capital standards. The World Council of Credit Unions (WOCCU) has been working in China since that time with government officials, RCC representatives and regulators from the PBOC and the China Regulatory Banking Commission. All-China Federation of Trade Unions (ACFTU), China’s only national trade union federation and the largest trade union in the world, has also sought World Council’s assistance in a separate initiative to form its own credit union for its 134 million members; a single field of membership bigger than the entire U.S. movement in aggregate.

In 2007, a group of Chinese delegates from the PBOC, central government officials and a new provincial trade association visited the U.S. Treasury, the NCUA and the CUNA & Affiliates/WOCCU Washington offices. Discussion topics included insurance and examination procedures, credit union operations and public and congressional affairs. The study group then went to both a U.S. credit union central bank (WesCorp) and NPCU (Arrowhead Central Credit Union in California.) This may have become coincidental but academically interesting case studies, as both U.S. credit unions were liquidated by the NCUA during the economic collapse for failing to meet toughened post-crisis regulatory standards.

The credit union landscape is changing internationally. It is clear that United States credit unions are destined to provide a bigger share of consumer financial services in the 21st century. The same is true, on an enormous scale, for the credit union system in China. We are all part of something big.


John Annaloro is the CEO of the Northwest Credit Union Association. Send any questions or comments to Matt Halvorson at mhalvorson@nwcua.org.

Posted in NWCUA.