Dec. 18, 2015

NCUA budget bill left out of big spending measure (updated)

(NOTE: This version is updated from the emailed version of this report from earlier today.) Legislation that would require annual hearings for the NCUA budget (including the overhead transfer rate) did not make the final cut in the “omnibus” $1.1 trillion spending package agreed to by House and Senate negotiators this week, and approved by both the Senate and House Friday. The bill now goes to the president for his signature and enactment. The NCUA budget legislation was part of a package of financial institution regulation legislation (affecting both credit unions and small banks), which was a portion of a financial services appropriations bill. That appropriations bill ultimately became a part of the overall, big spending bill. Reportedly, there is broad support for the credit union and bank provisions. However, as a deadline approached, House and Senate negotiators stripped the omnibus bill of many things not related to funding the government – including most provisions related to financial institutions – in order to assure passage. Provisions related to financial institutions that remained in the final spending bill, however, included a requirement that NCUA report to Congress the appropriate capital requirements for mortgage servicing assets related to its risk-based capital rule (other federal banking regulators will report similarly for institutions which they supervise that use Basel). It’s not necessarily the end of the line for the NCUA budget provision: on the House side, the NCUA Budget Transparency Act (H.R. 2287) was sent to the floor last week by the Financial Services Committee; no immediate action is scheduled. However, that legislation could still be considered in the next year’s session of the 114th Congress – and could arise again on the Senate side as well.

Board adopts rule for IOLTAs, issues final reg review call

A final rule implementing federal share insurance for certain escrow accounts, and a fourth (and final) call for comments for review of NCUA regulations, were approved by the NCUA Board Thursday, both on unanimous votes. Under the rule implementing the new law extending NCUSIF coverage to “interest on lawyer trust accounts” (IOLTAs), these and other escrow accounts would receive pass-through share insurance coverage. The accounts include real estate agents’ escrow accounts and prepaid funeral accounts, among others. NCUA said that, under the final rule, the agency also may provide share insurance coverage for other similar escrow accounts on a case-by-case basis, where a licensed professional or other individual serving in a fiduciary capacity holds funds for the benefit of a client as part of a transaction or business relationship. However, pass-through coverage would not be extended to pre-paid card accounts, as advocated by NASCUS and others (NASCUS had argued that share insurance should cover those prepaid card accounts that have characteristics conforming to that covered by the rule, and decline to provide pass-through coverage for those that do not). NCUA also said it would issue guidance, “written in plain English,” for examiners and credit unions before the rule becomes effective (which will be 30 days after publication in the Federal Register.). Under the fourth voluntary call for comments under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA), the board seeks observations on rules of procedure and safety and soundness covered by 16 existing rules (and subparts), including involuntary and voluntary liquidations, lending, investment and deposit activities, examinations and appraisals. NASCUS has commented on all three of the previous regulatory review calls. Also at Thursday’s meeting, NCUA Board Chairman said the agency is planning to issue a proposed rule in 2016 that would allow complex credit unions to use supplemental capital for risk-based capital purposes.

Text of NCUA final rule on IOLTA coverage

Registry process for CUSOs gets underway

The first steps in rolling out a credit union service organization (CUSO) registry are underway by NCUA in the form of letters sent to more than 700 “known CUSOs” the agency has mailing addresses for, the agency indicated this week. The letters seek verification of the CUSOs’ employer identification numbers (EIN), a component of the registry’s validation/registration process. The letters should begin arriving next week, according to NCUA. Under the rule adopted by NCUA in 2013, the agency had set Dec. 31 as the operational date for the registry. The actual registration process, the agency stated, will get underway next month with a formal Letter to Credit Unions about the registration process; the registry is expected to “go live” Feb. 1. Enrollment will be open for 60 days (until March 31). As noted in a NASCUS summary of the 2013 CUSO final rule, the registry is designed to provide a comprehensive view of the role that CUSOs play in the credit union industry. “Accordingly, no CUSOs, including those utilized by FISCUs, will be eligible for an exemption from the new registration and reporting requirements contained in 712.3(d)(4),” the NASCUS summary stated. “In addition, a new subsection was added to this section requiring the state to provide copies of the CUSO’s financial statements and reports to NCUA on request.”

NASCUS 2013 summary of CUSO rule
NASCUS 2011 comment letter on notice of proposed rulemaking/CUSOs

Assets, members grow through 3rd quarter at FISCUs

Assets and members numbers expanded at federally insured, state-chartered credit unions through the first three quarters of the year, although the number of FISCUs declined over that time, according to third-quarter data on federally insured credit unions released by NCUA. During the first three quarters of 2015, FISCU assets expanded by 5.38% to $555.6 billion. States leading in asset growth were Colorado (15%), Idaho (11.62%) and West Virginia (8.42%). FISCU assets accounted for 47.1% of all assets in federally insured credit unions (up from 46.9% at year-end 2014). Membership, meanwhile, grew by 3.32% (or 1.5 million), for a total of 47.5 million. States leading in membership growth among FISCUs were Colorado (9.13%), Oregon (5.14%) and New Mexico and Washington (both at 4.94%). Memberships at FICSUs accounted for 46.5% of all members in federally insured credit unions, up from 46.33% at year-end 2014. The number of FISCUs, however, has declined by 71 (or just about 3%), to 2,276 from 2,347. FISCUs make up 37.37% of all federally insured credit unions – but that’s up from year-end 2014, when FISCUs accounted for 34.91% of the FICU universe. Twenty-four states saw no change in the number of FISCUs. However, among those that did see declines were Michigan (with 12 – for a total of 162 at the end of third quarter), Wisconsin (nine, for a total of 152), Illinois (eight, for a total of 204) and Iowa (seven, for a total of 99). These states account for 27% of all FISCUs. Separately, NASCUS has also kept a close eye on conversions and mergers affecting FISCUs and FCUs. Since 2014 (and through October), 14 FCUs have converted to FISCUs (and three FISCUs have converted to FCUs); 38 FCUs have merged into state credit unions, and three state CUs into FCUs.

FISCUS vs. FCUS at Sept. 30, 2015
State-by-state breakdown of FISCU totals as of Sept. 30, 2015

‘Bulletin’ added to terrorism advisory system

A “bulletin” has been added to the National Terrorism Advisory System (NTAS) for informing the public of terrorist threats, making it the third leg of a group of alerts that, until this week, included only “elevated” and “imminent” alerts. The Department of Homeland Security, in announcing the new NTAS component, noted that it has never issued either of the types of alert because “neither the circumstances nor threat streams have risen to the required level or purpose of the system.” The new bulletin level, however, is designed to provide “information describing broader or more general trends and current developments regarding threats of terrorism.” In a release this week, DHS said the new bulletins will share “important terrorism-related information with the American public and various partners and stakeholders, including in those situations where additional precautions may be warranted, but where the circumstances do not warrant the issuance of an ‘elevated’ or ‘imminent’ Alert.” The bulletins will summarize the issue at hand, its importance for public awareness, U.S. Government counterterrorism efforts, and recommendations to the public on how it can contribute to the overall counterterrorism effort.

Current NTAS “Bulletin”

Cybersecurity Symposium planning underway

It may be more than eight months away, but we’re already planning for the 2016 NASCUS/CUNA Cybersecurity Symposium, set for Aug. 1-2 in Chicago. After two years of tremendously popular symposiums, we’re picking up where those programs left off – with demonstrations of cutting-edge techniques, best practices and timely procedures that can protect both regulators and financial institutions from the latest threats. We’ll also be taking a close look at the latest trends in the cybersecurity environment. Registration is open – and so is our website with some key details you’ll need to begin planning your participation. Check it out!

2016 Cybersecurity Symposium website and registration

Briefly: New regulator in Arizona

Andy Tobin has been named interim superintendent of the Arizona Department of Financial Institutions, replacing outgoing Superintendent Lauren Kingry, who recently resigned. In October, Tobin was appointed director of the Arizona Department of Insurance, a position he will continue to hold while also serving as interim financial institutions superintendent. Tobin is a former member of the Arizona House of Representatives (including service as Speaker). In January of this year, he was named director of the Arizona Department of Weights and Measures.

Information Contact:
Patrick Keefe, NASCUS Communications, or (703) 528-5974