Fareed Zakaria had an excellent article in the Washington Post earlier this month. The focal point of the article underlined the notion that, from a public policy standpoint, we spend too much time thinking about risk instead of considering the reward. Zakaria makes the point that in government the incentive is always to take every precaution and spend as much money as necessary to ensure that bad things don’t happen. Further, you are punished when bad things happen, but by contrast, if you make many good things happen, you rarely get more than a pat on the back.
I often think this is true with AML/CFT regulations, where regulators become so concerned with preventing something bad happening on their watch, that it makes them hesitant to tailor or right-size regulations for fear that it will diminish a standard or create latitude for misuse. They tend to err on the conservative side when it comes to proportionality and are reticent to consider the “reward” side to a risk-based approach to regulations.
This is where I tend to agree with Mr. Zakaria’s article. The reward for tailoring regulations for credit unions from a public policy standpoint is that more vulnerable and underserved populations will be served. The benefits of financial inclusion and financial stability will be greatly improved. My hope is that our regulators will get more than a pat on the back when they engage in adopting proportional regulation. The reward is apparent for all of us.
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