March 3, 2017
In GAC meetings, three priorities emphasized:
OTR, alternative capital, NCUA Board reform
Focusing on key issues for the state system, state credit union system leaders from NASCUS met with key groups and representatives from the credit union industry, the Congress and federal regulatory agencies this week as thousands from the credit union system in general met in Washington for the CUNA Governmental Affairs Conference (GAC). In the meetings, NASCUS President and CEO Lucy provided an outline of NASCUS priorities, including: NCUA transparency for the overhead transfer rate (OTR); alternative/supplemental capital, and; NCUA Board reform.
On the OTR, NASCUS told each group that it is urging NCUA to complete the process it began last year seeking comment on the methodology of the transfer rate, and develop a new approach to the methodology, emphasizing fairness and transparency, for the credit union system to consider. On the agency’s advance notice of proposed rulemaking (ANPR) for alternative capital (now out for comment to May 9), NASCUS said it is urging the credit union system to file comments about the proposal (as will NASCUS). On NCUA Board reform, NASCUS said it continues to support a five-member panel, with one seat reserved for a person with state credit union regulatory experience.
“Our goal is to send a consistent message to the credit union system and Washington about our priorities, and we think we accomplished that,” said NASCUS President and CEO Lucy Ito. “Our challenge, and that for the state system, going forward will be to follow up in each of these areas – which is what we are already doing post-GAC.”
Among the credit unions groups that NASCUS met with are: American Association of Credit Union Leagues (AACUL), and Credit Union National Association (CUNA); CUNA Mutual Group; National Association of Federally-insured Credit Unions (NAFCU); National Association of Credit Union Service Organizations (NACUSO). On Capitol Hill, the state representatives sat down with (among others) representatives of the financial institutions subcommittee of the House Financial Services Committee, and; a representative of the Senate Banking Committee. Among the federal agencies, NASCUS spoke with staff and board members of NCUA, representatives of the Consumer Financial Protection Bureau (CFPB) and the Treasury Department.
(In the photo: NASCUS at the GAC, including (clockwise from top left): Lucy Ito online video interview with Mike Lawson of CUBroadcast.com; NASCUS Chairman Mary Ellen O’Neill meeting with state league leaders and CUNA staff; NASCUS and NACUSO leaders discussing key issues.)
LETTER TO LAWMAKER REITERATES BOARD REFORM SUPPORT
Even before the GAC kicked off, NASCUS sent a letter to the chairman of the House Financial Services Committee last week noting that the state system continues to support an NCUA board with five seats – one of which is designated for a person with state credit union regulatory experience. In a letter to Chairman Jeb Hensarling (R-Texas), NASCUS’ Lucy Ito noted that a recent memo from the chairman to committee leaders, outlining a revised Financial CHOICE Act for this Congress, recommends that the NCUA Board consist of three members instead of five. “In our July 2016 correspondence to your office, we noted that increasing the number of NCUA Board members has been a long-championed goal of NASCUS,” Ito wrote. “From our perspective, such a fundamental change in the NCUA’s leadership structure would enhance the Board’s deliberative process, expand its collective expertise and improve the efficient administration of NCUA’s business.”
Whether the agency’s board has five or three members, the association believes that having an individual on the board with state credit union regulatory experience ensures a diversity of voices and supervisory experience, Ito wrote. That diversity and experience, she added, “will encourage broader, more robust discussion and will bolster NCUA’s accountability to all of its stakeholders including the state credit union system.” The Financial CHOICE Act (which stands for “Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs”) was first introduced last summer (in the previous Congress). A new version of the bill for the current Congress is expected to be introduced soon.
NCUA LEADER INCLUDES STATE SYSTEM GOALS IN GAC REMARKS
In outlining 15 areas for reducing the regulatory and supervisory burden on credit unions during his address to the credit union audience at the CUNA GAC, NCUA Acting Chairman J. Mark McWatters selected four that NASCUS has urged him to consider in a recent letter. Plus, in his remarks at the Washington gathering, the acting chairman said that the agency should work with state regulators to strengthen the state system. In early February, after he had been appointed acting chairman, NASCUS’ Lucy Ito sent to him a letter outlining several key areas where “NASCUS and the state credit union system are particularly well-positioned to assist” the agency. In his remarks this week, McWatters said that he and Board Member Rick Metsger and the NCUA staff were analyzing 15 issues, with an aim of reducing the regulatory and supervisory burden on the credit union community “without threatening the safety and soundness of the National Credit Union Share Insurance Fund.”
Four of those issues were recommended in NASCUS’ letter earlier in the month, and the acting NCUA chairman noted them as:
- NCUA should revisit the risk-based net worth regulation “and other needlessly burdensome rules;”
- The agency should form a Credit Union Advisory Council in order to hear – and learn – directly from the credit union community “as we work collaboratively to identify needless regulatory burden and create cost-effective solutions.”
- The credit union regulator should consider how it could work more closely with the Financial Accounting Standards Board (FASB) by providing technical expertise to “to help ensure that the cooperative, not-for-profit spirit and other unique attributes of the credit union community are not overlooked in their rules, guidance, and enforcement actions.” (McWatters also included the CFPB in this approach.)
- NCUA should work with Congress to update the Federal Credit Union Act to “facilitate credit union operations and growth, and reflect the way people share common bonds today.”
In other comments, McWatters raised the possibility of closing the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) this year, four years before the scheduled closing. Money from the fund would be moved into the National Credit Union Share Insurance Fund in order to avoid charging a premium. NCUA has projected the insurance fund’s equity ratio, already below the 1.30 percent operating level, will continue to decline, and staff last November projected a possible premium of 3 to 6 basis points.
OTR, BUDGET, EXEC ORDERS ON NEW LEADER'S MIND, TOO
“Enhanced accountability” to stakeholders on such issues as the overhead transfer rate (OTR), and more transparency for the agency’s operating budget, were vowed by NCUA Acting Board Chairman J. Mark McWatters in his first offering as leader of the agency in its quarterly (formerly monthly) newsletter. In his “Chairman’s Corner,” McWatters said the OTR and budget approaches would fit into his three areas of focus as acting chairman: regulatory review with goal of reducing or streamlining rules; a comprehensive review of agency operations; greater control of agency budget and resource-allocation processes.
In other comments, McWatters estimated that at least two of the executive orders issued by President Donald Trump in February and January are expected to “influence” the work of the federal credit union regulator. He wrote that the Financial Stability Oversight Council’s report (mandated by Trump’s Feb. 3 order, “Presidential Executive Order on Core Principles for Regulating the United States Financial System”, and due by June) and the “1-for-2” regulation reduction (outlined in a Jan. 30 order, “Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs”) are both expected to affect the agency. “NCUA, as a member of FSOC, will work with the other members of the council to complete this report,” McWatters wrote.
Regarding the “1-for-2” regulatory reduction order (which instructs agencies that whenever they introduce a regulation, they must first abolish two others), McWatters called that “of significance” to the agency. “I remain committed to bringing true regulatory relief to the extent permitted by applicable law and to protecting the deposits of the more than 106 million Americans who rely on federally insured credit unions for their financial needs, all in a manner that ensures the continued safety and soundness of the National Credit Union Share Insurance Fund,” McWatters wrote.
A New Chairman’s Corner
FORMER CHAIRMAN DESCRIBES CHOICES FOR CONSUMERS, AGENCY
Rolling up his sleeves and pressing the accelerator to make changes “ in the best interests of American consumers” and NCUA were the choices NCUA Board Member (and former chairman) Rick Metsger said he made when he became agency leader nine months ago. The choices, he said in a speech at the CUNA GAC this week, were easy. “The future of the credit union movement cannot be placed on autopilot,” he said. “It requires leadership, action, and the courage to change when change is warranted.” Among his accomplishments as chairman, he listed completion of a modernized field-of-membership rule; implementation of the business lending rule (and successful defense in court); restoration and expansion of the agency’s public budget briefings and public briefings on emerging credit union issues to increase transparency and accountability; seeking comments on a possible rule on alternative capital at credit unions. The former chairman acknowledged the “cooperation and commitment” of his successor, Acting Chairman McWatters, thanking him for “his steadfast support over the last year.” Metsger’s term on the board officially ends in August.
TRUMP MANDATES TASK FORCES TO CUT RED TAPE
Task forces meant to eliminate regulatory red tape are required to be established by each federal agency under a new executive order signed by President Donald Trump late last week, with each agency required also to evaluate existing regulations and identify candidates for repeal or modification. The order, according to the administration, is intended to enforce its regulatory reform agenda. It requires each agency head to, within 60 days, designate an agency official as a “regulatory reform officer” (RRO), as well as a “regulatory reform task force,” which will oversee regulatory reform and identify repeal, replacement or modification of existing rules. The order states that, at a minimum, each task force will look for regulations that eliminate jobs, or inhibit job creation; are outdated, unnecessary, or ineffective; impose costs that exceed benefits; “create a serious inconsistency or otherwise interfere with regulatory reform initiatives and policies;” and that rely in whole or in part on “data, information, or methods that are not publicly available or that are insufficiently transparent to meet the standard for reproducibility.”
SUPPLEMENTAL CAPITAL BILL INTRODUCED IN HOUSE (AGAIN)
Legislation that would redefine “net worth” for federally insured credit unions to include uninsured non-share capital accounts under certain conditions – and give federal credit unions ready access to supplemental capital – has again been introduced in the House, and again by long-time credit union supporters. Reps. Peter King (R-N.Y.) and Brad Sherman (D-Calif.) introduced the “Capital Access for Small Businesses and Jobs Act” (H.R. 1244) which is expected to resemble legislation introduced in the last Congress (H.R. 989). The text of the latest bill is not yet available. The bill in the 114th Congress (also introduced by King and Sherman) would have allowed federal credit unions to receive payments on certain uninsured non-share accounts, subject to “such terms, rates, and conditions as may be established by the board of directors, within limitations prescribed by the NCUA Board.” It required any board-prescribed system of prompt corrective action to take into account that “credit unions rely predominantly (under current law, must rely) upon retained earnings to build net worth” and redefines "net worth" with respect to any insured credit union (other than a low-income credit union) to include uninsured non-share capital accounts that meet certain conditions. The bill in the last Congress, while introduced, received 32 co-sponsors – but moved no further in the legislative process.
ANOTHER VOICE JOINS US IN URGING COMMENTS ON ALTERNATIVE CAPITAL
While action is proceeding at NCUA and in the Congress on alternative and supplemental capital, more voices are joining NASCUS in urging the credit union system to comment on the issue, including: CUNA Mutual Group. In a column this week appearing on CUToday.info, Theran Colwell (vice president of lending loan growth at the company) encouraged the credit union system to weigh in, and also offered insights to how alternative capital has been applied by credit unions outside the U.S., including Australia. “Alternative capital sources would provide immense opportunities, and CUNA Mutual Group stands ready to help,” he wrote. “We appreciate the NCUA’s willingness to solicit comments on this critical issue. We look forward to participating in the upcoming advance notice of proposed rulemaking (ANPR) and would encourage others throughout the industry to participate as well.”
BRIEFLY: Labor Dept. pushes back ‘fiduciary duty’ date; CUAC deadline extended
The Labor Department this week proposed a 60-day delay of its fiduciary rule implementation date, previously set for April 10, to June 9. Comments will be accepted on the proposal to March 15. The rule, which affects how financial advisers may advise clients on retirement savings, would hold advisers to a “fiduciary standard” … The application deadlines for CFPB’s Credit Union Advisory Council (CUAC) and Consumer Advisory Board (CAB) are extended through March 8, to make up for bureau website troubles hampering applications.
Patrick Keefe, NASCUS Communications, firstname.lastname@example.org or (703) 528-5974