‘Guidance’ offered on supervisory guidance proposal

(Jan. 8, 2021) The state credit union system supports NCUA’s efforts to clarify how it will treat supervisory guidance issued by the agency in the context of examination and supervision, NASCUS said in a comment letter filed with NCUA Monday.

However, NASCUS also urged the agency in the letter to coordinate with state agencies as it implements a final rule, and to consider incorporating definitions of covered guidance into the final rule.

NASCUS was commenting on a proposal issued by NCUA in October aimed at clarifying and codifying the role of supervisory guidance. In doing so, the agency joined with other federal financial institution regulators who had earlier issued the same proposal for the institutions they supervise.

Under the proposal, the meaning of “supervisory guidance” would be clarified as meaning, essentially, it doesn’t have the force of law. If finalized, it would codify an interagency statement issued by all of the agencies in September 2018. That statement was intended to make clear that, unlike a statute or regulation, supervisory guidance is not the same as statute or regulation. “Supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance,” the 2018 statement read.

In its comment, NASCUS said the state system supports the proposal, but also made some recommendations, including:

• NCUA should coordinate with state supervisory agencies. Noting that the prevalence of joint examinations and the pilot Alternating Examination Program necessitate NCUA coordinate implementation of this rule with state regulators, NASCUS urged the agency to work with states to ensure a mutual understanding of how NCUA examiners will manage supervision of activities “for which guidance rather than rules form the foundation of supervisory expectations.” NASCUS also urged the agency to ensure state regulators understand how NCUA will incorporate state reliance on state guidance into joint examinations – or in alternating exams where NCUA may be the lead. “NCUA must also communicate to state regulators what, if any, effect state examinations citing state guidance will have on NCUA reliance upon, and acceptance of, state examinations of a federally insured state credit union,” NASCUS added.
• The agency should consider incorporating definitions of covered guidance into a final rule. NASCUS suggested that a final rule would benefit from additional clarification as to what is “supervisory guidance,” noting that the proposal does not contain a formal definition. “It is foreseeable that confusion could arise as to whether existing and future issuances are covered by the rule,” NASCUS wrote. “For example, NCUA Interpretive Rules and Policy Statements (IRPS) are part exempted interpretive rules and covered policy statements. NCUA might consider explicitly identifying existing and future issuances as either covered supervisory guidance or exempt interpretive rule to provide clarity for stakeholders.”

Finally, NASCUS urged the agency to “remain vigilant” to ensure implementation of the proposal (should it become a final rule) does not inadvertently diminish communication of supervisory and regulatory expectations to credit unions.

LINK:
NASCUS comment: Proposed Rule, Role of Supervisory Guidance