Feb. 12, 2016
The importance of commenting on the overhead transfer rate (OTR) methodology is driven home in a new video debuting this week by NASCUS President and CEO Lucy Ito. In the short piece (about two minutes), Ito urges state regulators and credit unions to be sure to file comments by April 26, the end of the comment period (click on the image, or the link below, to view). “At stake is whether NCUA should have carte blanche in the use of credit union dollars contributed to the Share Insurance Fund,” Ito says. “At NASCUS, we don’t think that the agency should have carte blanche. Yet, using the current method for determining the OTR, the agency assigns any costs it chooses to the insurance fund, calling the costs ‘insurance related.’” The NASCUS leader indicates that both state and federally chartered credit unions have an additional interest in the future of the OTR methodology. “Increasing the OTR – which NCUA has done each year since 2013 -- decreases the likelihood that federally insured credit unions of either charter will receive a rebate from the insurance fund,” she says. NCUA should not have carte blanche in spending credit union system dollars, Ito says, adding “this is our chance to tell them so.”
Legislation requiring NCUA to expose its budget – including the overhead transfer rate – to an annual public comment period has received three more co-sponsors, including a member of the House leadership, which is increasing slightly the bill’s chances of being enacted. The bill, the NCUA Budget Transparency Act (H.R. 2287) by Rep. Mick Mulvaney (R-S.C.), now has 28 co-sponsors -- 23 Republicans, five Democrats. The latest to sign on are Reps. Roger Williams (R-Texas), Jeff Duncan (R-S.C.) and Patrick McHenry (R-N.C.). Williams and McHenry signed on in late December; Duncan in early January. McHenry is Republican chief deputy whip in the House and vice chairman of the Financial Services Committee. Before he signed onto the bill in December, the proposal’s chances of becoming enacted were about 20%. Now, according to govtrack.us, the bill’s chances have risen to 29%. The measure was voted out of committee in December, and is pending on the House floor. (Govtrack.us also notes that only 21% of bills that made it past committee in 2013-15 were ultimately enacted.) A companion bill in the Senate (S.924) is pending before the Banking Committee.
Meanwhile, the Congressional Budget Office weighed in Jan. 29 with a cost estimate on the bill, reporting that NCUA would need “several additional staff members” to complete required work to respond to public comments. The cost of that staff would be offset, CBO estimated, “by additional fees collected from federal credit unions.” However, CBO also reported that “the aggregate cost of the mandate would be small.” NASCUS has written in support of the legislation.
Urging NCUA to return to an 18-month exam cycle is the main point of a letter being circulated for signatures of their fellow lawmakers by two members of Congress. Reps. Frank Guinta (R-N.H.) and Rubén Hinojosa (D-Texas) – both members of the House Financial Services Committee – are circulating the letter, which asks NCUA Board Chairman Debbie Matz to agree to return to an 18-month exam cycle for well-run credit unions. The letter points out that credit unions are now the only federally regulated depository institution that are subject to a 12-month exam regimen at the federal level, since the three bank regulators -- Office of the Comptroller of the Currency, FDIC and the Federal Reserve Board -- have also taken their first steps toward an extended exam cycle for banks in the wake of congressional action last year.
NASCUS has written to Congress within the last year urging it to push the agency to raise the threshold for annual insurance exams of state-chartered credit unions. “NCUA could ease the regulatory burden for credit unions, and enable valuable supervisory discretion for state regulators, by raising the threshold for annual insurance exams to institutions with assets of $500 million or more, and relying on state regulator exams for institutions below that threshold on a risk-based basis,” NASCUS wrote leaders of the House financial institutions subcommittee last summer.
Consideration of a final rule affecting member business lending is on the agenda for the NCUA Board’s regular monthly meeting next week (Feb. 18) in Washington. The proposed rule – which garnered more than 3,000 comment letters (including a significant number from bankers in opposition) – represents a potentially dramatic change in the agency’s approach to regulating MBLs. Under the proposal, NCUA would move to “principle-based” regulation as opposed to the existing MBL rule, which contains thresholds and waivers characterized by NCUA as “prescriptive.” The proposed rule would eliminate most of the existing regulatory thresholds and limits in Part 723, replacing those provisions with expanded requirements for policies, procedures, and oversight by credit union management and credit union directors. In its comments, NASCUS noted that while the proposal is worthy of support, the agency should consider a number of changes that would recognize the role of state-chartered credit unions, and promote the health of the credit union system overall (e.g., by preserving the ability of states to offer varying, and sound, regulatory approaches to supervising commercial lending).
Two new summaries from NASCUS outline key portions of NCUA’s new Risk-Based Capital Rule (RBC) and changes to the Bank Secrecy Act Currency Transaction Report (BCTR). The RBC rule summary describes the 10 “buckets” for risk-weighting off-balance sheet items by complex credit unions under the new rule, which range from 0% risk-weighting to 1,250% risk-weighting – and the items that fall into the buckets for determining their respective risk. “The final rule incudes a tiered risk weight framework for high concentrations of residential real estate loans and commercial loans,” the summary notes. “Therefore, as a credit union's concentration in those asset classes increases, incrementally higher levels of capital are required.” The summary also notes that NCUA has stated it will update its Call Report by early 2018 to automatically calculate each FICU’s risk-based capital ratio.
The BCTR summary outlines five specific changes to the current report being sought by the Financial Crimes Enforcement Network (FinCEN). While there are no additional regulatory requirements contained in the proposal (nor substantive changes to CTR requirements), the NASCUS summary points out that the current BCTR – adopted nearly five years ago – contains a range of reporting limitations. The “proposed collection” by FinCEN seeks to address those limitations.
President Obama unveiled a $19 billion “cybersecurity action plan” this week, which calls for funding additional federal government transition to EMV, fostering development of additional authentication factors, and moving away from use of Social Security numbers for identification … Got an itch to talk issues in an attractive, intimate venue? Our one-day CU Executive Forum March 23 in Seattle may be just the balm for you. It’s open to all state and federal credit union board members, supervisory committee members and credit union management.
Patrick Keefe, NASCUS Communications, firstname.lastname@example.org or (703) 528-5974