Role of Supervisory Guidance – RIN 3133–AF28
January 4, 2021
Melane Conyers-Ausbrooks
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314
Re: NASCUS Comments on Proposed Rule: Role of Supervisory Guidance – RIN 3133–AF28
Dear Secretary Conyers-Ausbrooks:
The National Association of State Credit Union Supervisors (NASCUS)[1] submits this letter in response to the National Credit Union Administration’s (NCUA’s) request for comments on RIN 3133-AF28, Proposed Rule: Role of Supervisory Guidance.[2] The proposal, issued in conjunction with the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Bureau of Consumer Financial Protection, would amend and codify the 2018 Interagency Statement Clarifying the Role of Supervisory Guidance (2018 Interagency Statement).[3]
NASCUS appreciates the competing interests implicated by a regulatory agency’s issuance of guidance and the important role played by guidance in providing regulated entities context and insight into a regulator’s supervisory expectations. We support NCUA’s efforts to clarify how the agency will treat supervisory guidance it issues in the context of examination and supervision.
NCUA Should Coordinate with State Supervisory Agencies (State Regulators or SSAs)
While the proposed codification of the 2018 Interagency Statement applies only to federal examiners, the prevalence of joint examinations and the pilot Alternating Examination Program necessitate NCUA coordinate implementation of this rule with State Regulators. Supervisory expectations for critical issues such as management of concentration risk and oversight of third-party service providers are established primarily through guidance issued to examiners and to the industry.[4] To ensure seamless coordination between NCUA and the states, NCUA should 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. With respect to state guidance, NCUA must ensure state regulators understand how NCUA will incorporate state reliance on state guidance into joint examinations or in alternating examinations where NCUA may be the lead agency. NCUA must also communicate to state regulators what, if any, affect state examinations citing state guidance will have on NCUA reliance upon, and acceptance of, state examinations of a federally insured state credit union.
NCUA should work with NASCUS to consult with SSAs regarding the implementation of NCUA’s policy and rule upon finalization.
NCUA May Wish to Consider Incorporating Definitions of Covered Guidance into the Final Rule
A final rule would benefit from additional clarification as to what constitutes guidance. Footnote 4 of the proposal’s preamble provides helpful clarification of the distinction between various forms of guidance, policy statements, and interpretive rules (the latter of which are not within the scope of the proposed rule).[5] However, the proposed rule text does not contain a formal definition of “supervisory guidance” and credit union staff and examiners reviewing the rule in the future will likely be reviewing the final rule text and not the preamble and supplemental material. It is foreseeable that confusion could arise as to whether existing and future issuances are covered by the rule. 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.
Supervisory Guidance is an Important and Necessary Component of Safety and Soundness Compliance
NASCUS supports NCUA in the agency’s efforts to set clear expectations for stakeholders and we support this rulemaking. A shared understanding of requirements and expectations between regulators and credit unions benefits all stakeholders and credit union members. Guidance of all kinds plays an important role in helping ensure that mutual understanding. We urge NCUA to remain vigilant to ensure that implementation of this laudable rule does not have the inadvertent effect of diminishing communication of supervisory and regulatory expectations to the credit union system.
NASCUS commends NCUA and the other federal agencies for their responsiveness to industry feedback on the 2018 Policy Statement. We believe our recommendations would enhance the final rule and are compatible with the spirit of the rulemaking. We are happy to arrange dialogue between NCUA and state regulators regarding NCUA’s implementation of this rulemaking and any subsequent changes to NCUA’s supervisory process. To discuss our comments further, or if NASCUS may answer any questions, please do not hesitate to contact us at your convenience.
Sincerely,
– signature redacted for electronic publication –
Brian Knight
Executive Vice President & General Counsel
[1] NASCUS is the professional association of the nation’s 45 state credit union regulatory agencies that charter and supervise over 2,000 state credit unions. NASCUS membership includes state regulatory agencies, state chartered and federally chartered credit unions, and other important stakeholders in the state system. State chartered credit unions hold nearly half the $1.76 trillion assets in the credit union system and are proud to represent nearly half of the 123 million credit union members.
[2] “Role of Supervisory Guidance” 85 Fed. Reg. 215, 70512 (November 5, 2020).
[3] See Interagency Statement Clarifying the Role of Supervisory Guidance, (September 11, 2018). Available at https://www.federalreserve.gov/supervisionreg/srletters/sr1805a1.pdf.
[4] See Letter to Credit Unions 10-CU-03 Concentration Risk (March 2010) and Letter to Credit Unions 07-CU-13 Evaluating Third Party Relationships (December 2007).
[5] 85 Fed. Reg. 215, 70514 (November 5, 2020).