Regulatory Relief Act Provisions Significant to State Regulatory System

Mary Martha Fortney

While there are only a few provisions for credit unions in the Act, NASCUS is particularly pleased that one of the provisions allows for full voting rights to the Chairman of the State Liaison Committee (SLC) of the Federal Financial Institutions Examination Council (FFIEC).

This provision is important to the state regulatory system. NASCUS and the Conference of State Bank Supervisors (CSBS), as the two organizations representing state regulatory agencies, have long advocated for voting rights on the SLC. The voting rights ensure that state regulators are represented in the discussion on regulatory issues and guidance that affect the state regulatory system.

FFIEC is a formal interagency body that prescribes uniform principles, standards and report forms for the federal examination of financial institutions governed by the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS). The Council consists of the chairman of each of the organizations.

The SLC was developed to encourage state supervisory authorities to apply uniform examination principles and standards. The SLC is made up of five members, two appointed by FFIEC and one designated representative each from NASCUS, CSBS and the American Council of State Savings Supervisors. Steven Antonakes, commissioner of the Massachusetts Department of Banking, is the SLC Chairman. Jerrie Lattimore, administrator of the North Carolina Credit Union Division, is the NASCUS representative.

The SLC serves as advisors to FFIEC representing the interests of state-chartered financial institutions on regulatory issues and guidance. However, increasingly FFIEC is releasing guidance that rises to the level of rulemaking. Recent examples include guidance on Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) examination and authentication for internet banking environments. This guidance affects the state regulatory system making it very important that state regulators are active participants in the process with a vote on the Council. In fact, state-chartered credit unions make up more than forty percent of the nation’s credit unions and state-chartered banks represent 70 percent of banks nationwide.

In addition to the SLC chairman voting rights, NASCUS is pleased that the Act includes two other important provisions for state-chartered credit unions. The Act contains an amendment to the definition of net worth addressing the unintended consequences of the Financial Accounting Standards Board (FASB) Standard 141. This amendment allows net worth to be pooled in a credit union merger. NASCUS testified in support of this provision in both the House and the Senate.

The Act also allows state supervisors specific enforcement authority over disclosure information for nonfederally insured credit unions. The Act gives the Federal Trade Commission oversight of the manner and content of the disclosure information required in this section. NASCUS is appreciative that Congress recognized the importance of enforcement authority of state supervisors over state-chartered credit unions.

Enactment of the Regulatory Relief Act of 2006 is important to the financial services industry. But, there is more work to be done in the coming months.

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