# Understanding Credit Culture in Credit Unions: Insights from Vin Vieten
In the world of credit unions, establishing and maintaining a strong credit culture is crucial for success. But what exactly is credit culture, and how does it impact the day-to-day operations of a credit union? In a recent episode of the "With Flying Colors" podcast, host Mark Treichel sat down with Vin Vieten, a retired senior credit specialist from NCUA, to delve into this important topic.
## What is Credit Culture?
According to Vieten, credit culture is "your approach to providing credit to your customers, your members... It's how you're going to, why you're providing commercial financing and, and then really how you're going to do it." In essence, it's the philosophy and practices that guide a credit union's lending decisions and processes.
A strong credit culture aligns with the credit union's values and mission, providing a framework for consistent and thoughtful lending practices. It encompasses everything from risk tolerance to member service, shaping how credit unions evaluate and structure loans.
## The Importance of Credit Culture in Credit Unions
Credit culture is particularly important in credit unions due to their unique structure and mission. Unlike banks that focus on maximizing shareholder value, credit unions are member-owned and exist to serve their members. This distinction influences how credit unions approach lending.
As Vieten points out, "There's an added responsibility that credit unions be very complete in their approach in evaluating commercial credit risk with the focus being on the best interest of the borrower." This member-centric approach is a key aspect of credit culture in credit unions.
## Implementing Credit Culture
Establishing a strong credit culture starts at the top. The board of directors sets the overall mission and values of the credit union, while senior management translates these into specific lending practices. However, it's crucial that all staff involved in lending understand and embody the credit culture.
Vieten suggests a novel approach: "Bring your credit team together, the commercial credit team together and sit down to them and say, ask the question, do we have a credit culture? And obviously, hopefully they're going to say yes. And then ask them, what is that credit culture?"
This exercise can help ensure everyone is on the same page and understands the credit union's approach to lending.
## Credit Culture in Practice
A strong credit culture manifests in several ways:
1. **Consistent Approach**: All lenders within the credit union should approach lending decisions in a similar manner, guided by the established credit culture.
2. **Member Focus**: The goal is to provide "appropriate financing for the borrower," as Vieten emphasizes. This means structuring loans that meet the member's needs and align with their ability to repay.
3. **Risk Management**: While serving members is crucial, credit unions must balance this with maintaining safety and soundness. A strong credit culture helps strike this balance.
4. **Continuous Learning**: As the financial landscape evolves, credit culture should adapt. Ongoing training and education are crucial components of maintaining a robust credit culture.
## The Broader Impact of Credit Culture
It's important to remember that commercial lending in credit unions has far-reaching effects. As Vieten notes, "If you do the business, if you do it right, you're working with, again, a business that has an impact on so much of the local economy, the employees, the customers and everybody else."
A strong credit culture doesn't just benefit the credit union and its members—it can positively impact entire communities.
## Conclusion
Understanding and implementing a strong credit culture is vital for credit unions. It guides lending decisions, ensures consistency, and helps credit unions fulfill their mission of serving members while maintaining financial stability. By focusing on appropriate financing and thorough risk evaluation, credit unions can create a positive impact that extends far beyond their immediate membership.
As the financial landscape continues to evolve, maintaining a robust and adaptable credit culture will be key to the ongoing success of credit unions in serving their members and communities.
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