Sept. 16, 2016
Letter thanks co-sponsors of OTR transparency bill
As Congress gets ready to wind down before the election, NASCUS has reached out to the two co-sponsors of legislation that would increase the transparency of the overhead transfer rate (OTR) to thank them and support their efforts. In a letter to Reps. Mick Mulvaney (R-S.C.) and Denny Heck (D-Wash.), NASCUS President and CEO Lucy Ito expressed the association’s thanks and support for their bill, H.R. 5896.
“Your legislation encourages accountability by requiring the agency to provide insight into how they are determining which expenses are appropriately drawn from the NCUSIF, which has been a point of contention for many years,” Ito wrote. “Additionally, it will require the agency to provide details of their methodology and rationale to the stakeholders that are directly impacted. We are also hopeful, that Congress will determine that it is appropriate to require NCUA to submit its OTR methodology to the notice and comment process.”
The measure would require the NCUA to submit a report, along with its annual budget, that: provides a detailed analysis of how the agency’s expenses are assigned; specifies whether expenses are paid from the National Credit Union Share Insurance Fund (NCUSIF) or from federal credit union operating fees; and requires the agency to provide a rationale for any expenses paid from the NCUSIF. In addition, the bill requires the agency make the report available to the public.
The Mulvaney-Heck bill was introduced in July. Meanwhile, legislation that mirrors their measure is contained in the Financial CHOICE Act (HR 5983), which was voted out of the House Financial Services Committee this week and sent to the full House for consideration (see below).
HOUSE COMMITTEE PASSES CHOICE; ‘VALUABLE PROVISIONS FOR STATE SYSTEM’
Legislation that would make sweeping changes to the federal financial institution regulatory scheme – including that affecting the state credit union system – was adopted this week, 30-26, by the House Financial Services Committee. The 513-page bill now heads to the full House for consideration. However, given the congressional schedule (particularly with an election recess looming) further action on the bill (HR 5983) this Congress remains unclear. Nevertheless, the measure -- developed by Committee Chairman Jeb Hensarling (R-Texas) – contains a number of provisions of interest to the state system, changing the size of the NCUA Board (from three to five members, serving five year terms), extending the exam period for some credit unions to 18 months, and increasing the transparency by NCUA for the overhead transfer rate (OTR). NASCUS’ Lucy Ito, in a statement, said that the legislation provides valuable provisions for the state credit union system – including those mentioned above – which NASCUS has long advocated. For example, she pointed out that NASCUS has recommended increasing the size of the NCUA Board for the past 20 years. But she indicated there was more room for Congress to act, urging that the bill also include a provision designating one of the seats on the board for a candidate who has served as a state credit union supervisor. Doing so, she stated, would reflect the basic value of interaction between the board and state regulators, and the importance of the dual-chartering system to the health and safety of the credit union system. “Ultimately, consumers benefit when the state voice is heard – and when federal and state regulators work cooperatively,” she stated.
NCUA BOARD HEARS CORPORATE FUND, CYBERSECURITY REPORTS
An increase of nearly $400 million was realized for the net position of the NCUA Temporary Corporate Credit Union Stabilization Fund (TCCUSF) at mid-year, and the new cybersecurity assessment tool (CAT) likely won’t be rolled out for credit unions to use until the fourth quarter of next year, according to two reports given to the NCUA Board at its regular monthly meeting Thursday. Regarding the stabilization fund, NCUA CFO Rendell Jones told the board that, based on current projections, NCUA expects no future stabilization fund assessments to credit unions. However, he also noted that the agency has no funds available to provide federally insured credit unions with an immediate rebate, reiterating that NCUA must first repay the $1 billion in outstanding Treasury borrowings. Meanwhile, NCUA Office of Examination and Insurance Deputy Director Tim Segerson reiterated to the board that the FFIEC cybersecurity assessment tool “is not mandatory” for use by credit unions, although it will become part of the examination process. NCUA Board Chairman Rick Metsger queried Segerson on that point, suggesting an inconsistency. But Segerson responded that credit unions must have a cybersecurity risk assessment process that is (among other things) effective and fits the size of the credit unions’ operations. The FFIEC CAT, he said, is an “expert protocol” which can help credit unions establish that process. However, as he noted, it is not the only one.
SUMMARY LOOKS AT PROPOSED MORTGAGE DISCLOSURE AMENDMENTS
A summary of proposed CFPB amendments to federal mortgage disclosure requirements required under the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) has been published by NASCUS. The amendments, the summary points out, are intended to memorialize the Bureau’s previously issued informal guidance, clarifications and technical amendments. The summary highlights several substantive amendments proposed. Comments are due to CFPB by Oct. 18
FED LEADER: SMALL BANKS LOSE MARKET TO LARGE BANKS – NOT CUS
Smaller, so-called “community banks” aren’t losing their market share to credit unions, they are losing to the largest banks – at least in the opinion of Kansas City Federal Reserve President Esther George, a member (since 2011) of the monetary-policy setting Federal Open Market Committee of the Federal Reserve. In comments published Aug. 29 by the American Banker newspaper (a trade publication), George asserted that the banking industry is being concentrated into the largest banks, and small banks are losing market share. “You'll hear small banks talk about credit unions as competition, but look at the market share of credit unions over that 30-year period. It's barely budged. So small banks aren't losing their market share there, they're losing it to larger banks,” she said.
SUMMIT NOTES: Program set – hotel deadline Sept. 17
In just three weeks, the state credit union system gathers in Chicago -- Oct. 5-7 -- to hear from NCUA Board Chairman Rick Metsger; NCUA Board Member J. Mark McWatters; House Financial Services Committee Member Rep. Randy Hultgren (R-Ill.); Illinois Gov. Bruce Rauner (R) – and many more – who will all be discussing the challenges and opportunities facing the credit union system. Deadline for making hotel reservations, at our special rate, is Sept. 17 (just days away). Aside from the speakers, the Summit has a strong agenda of more than 21 hours of general sessions, group discussions and networking, featuring the latest topics and issues, including: FinTech: Preparing for the coming wave; CECL: Adapting to it -- or not; The new frontier of commercial lending; Marijuana business banking; Payment systems; Private share insurance; Privacy and cybersecurity for credit unions, and much more. There’s still time to register; see the link below for the most current agenda, speaker outlines – and registration and hotel information.
TWO VITAL WEBINARS ON HORIZON: CECL AND THE BLOCKCHAIN
October brings two new webinars from NASCUS on hot topics: The new current expected credit loss (CECL) accounting standard from the Financial Accounting Standards Board (FASB), and opportunities and challenges surrounding blockchain innovation in the financial services industry. The blockchain event is designed to give participants a better understanding of the technology, its potential-use cases and the hurdles developers must overcome before blockchain can truly “change the world.” The CECL session is intended to provide participants with an informed place to begin the process of implementing CECL, as well as recommended next steps – even though the effective date of the new standard is still nearly five years away. Most experts agree that, given the amount of time and effort that will be required to prepare for the implementation of CECL, financial institutions should begin considering their approaches now. The blockchain webinar is Oct. 20 at 1 p.m. ET; the CECL webinar is Oct. 27, also at 1 p.m. ET. See the links below for more information – and to register.
BRIEFLY: ICURN participation; OH events a hit; on the road with Ito
NASCUS participated in the conference of the International Credit Union Regulators’ Network (ICURN) this week in Alexandria, Va., with EVP and General Counsel Brian Knight joining a panel on balancing anti-money laundering and financial inclusion objectives. NASCUS Vice Chairman Mary Ellen O’Neill, director, financial institution division, Connecticut Department of Banking, and CEO Lucy Ito also participated in the program. Representatives from the UK, Brazil, Canada, Guatemala, Poland, Kenya, Swaziland, Mexico and other locales – as well as from NCUA -- were also scheduled to participate … Our recent conferences in Ohio (in partnership with the Ohio Department of Commerce/Division of Financial Institutions) – “Ohio Credit Union Day” (Aug. 29), and an examiners’ conference that concluded Thursday– drew more than 130 participants from among credit unions and regulators … NASCUS’ Lucy Ito has also been on the road, visiting a number of states – including New Mexico, where she discussed dual chartering, states’ rights and protection of choice for credit union charters.
Patrick Keefe, NASCUS Communications, firstname.lastname@example.org or (703) 528-5974