NASCUS Encourages NCUA Regulatory Relief for State Charters

Dec. 20, 2011 -In fall 2011, National Credit Union Administration (NCUA) Chairman Debbie Matz announced a Regulatory Modernization Initiative aimed at providing regulatory relief for credit unions. NASCUS has encouraged the agency to consider additional relief for state charters, as the proposed efforts thus far primarily provide regulatory relief for federal credit unions (FCUs).

NASCUS communicated its regulatory relief recommendations in a letter to the NCUA Chairman and continues to discuss the recommendations with NCUA leadership. One of the agency's regulatory relief efforts includes expanding RegFlex for FCUs. The NCUA Board approved a proposed rule in December to allow FCUs to engage in activities permitted by the existing RegFlex rule without the need to apply for a RegFlex designation. The proposed rule would eliminate the charitable contributions rule and add relief provisions to rules that apply to eligible obligations, nonmember deposits, fixed assets, and investments.

"NASCUS is supportive of the NCUA's efforts to provide regulatory relief, but wants to ensure that state charters benefit from the agency's initiative. Recent proposed rules on loan participations and CUSOs would only add more regulatory burden for FISCUs," said NASCUS President and CEO Mary Martha Fortney. "NASCUS is working with the agency to achieve meaningful regulatory relief for FISCUs and will continue to defend against proposed regulation in areas traditionally and appropriately governed by the states."

Among its recommendations, NASCUS urges NCUA to create a task force with NASCUS regulators to review the NCUA rules applicable to FISCUs to determine where relief may be provided. Also, NASCUS has long urged NCUA to ease the regulatory burden on FISCUs by changing the format of its rules in Subpart B of Part 741. Unlike Subpart A, Subpart B does not state the text of rules applicable to FISCUs, but merely incorporates by reference rules outside of Part 741. We strongly recommend that the NCUA incorporate the text of its insurance rules into Part 741, Subpart B in their entirety rather than by reference. The complicated nature of NCUA's rules makes it difficult for FISCUs, as well as state and federal examiners and other interested parties, to easily discern which insurance rules, or in some cases which portions of such rules, apply to FISCUs. 

Further, NASCUS recommends that NCUA more promptly incorporate new rules or changes to its online version of regulations. Currently, NCUA’s website includes a complete version of its rules in effect as of March 2010. But, in addition, readers must read 30 other final rules in order to understand the changes to NCUA rules since March 10, 2010. NASCUS suggests that changes or new rules should be incorporated within a two week time period to facilitate greater understanding by all interested parties of rule changes.   

NCUA could also relieve the burden on healthy FISCUs of multiple examination contacts in a single year by re-emphasizing its statutory reliance on state examinations. Last year, NCUA announced its policy shift to send federal examiners annually to every FISCU with assets in excess of $250 million, regardless of the CAMEL rating or condition of the institution.  When NCUA is unable to accompany the state regulator on the scheduled primary examination of the FISCU, the agency has indicated its intention to schedule a separate federal onsite insurance review. NASCUS believes this policy should be reconsidered and NCUA should rely on the state examination and spare the FISCU the disruption of a second examination. 

To view our recommendations in full, follow this link. We welcome your feedback on this issue at brian@nascus.org.