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Nov. 11, 2016

Trump election has implications
for NCUA leadership (and direction?)

The election of Donald J. Trump as president this week will have an impact on credit unions, as the leadership of NCUA is likely to change early next year. With a Republican sitting in the White House, the chairmanship of the NCUA Board will likely shift -- from Democrat Rick Metsger to either Republican Board Member J. Mark McWatters (who the president would simply have to designate as chairman; no Senate approval is needed), or to a new member, who would be appointed by the new president to the current open seat on the board, and also designated as chairman. That nomination would be subject to Senate approval. The nomination this summer of John Herrera by President Obama to the open board seat (resulting from the retirement this spring of former Chairman Debbie Matz) will essentially expire with the completion of the Obama administration in January. In any event, NASCUS President and CEO Lucy Ito voiced support for a state regulator viewpoint on the NCUA Board. “This would be a terrific opportunity for the new administration to consider someone with state supervisory experience as the new NCUA Board member,” Ito said. Metsger’s term ends in August, 2017; McWatters’ in August, 2019.

Meanwhile, it’s unclear what (if any) impact a moratorium on new financial regulations, pledged by President-elect Trump during his campaign this summer, will have on recent NCUA actions. In an Aug. 8 speech to the Detroit Economic Club, candidate Trump called for the moratorium on the federal regulations until “significant growth” is realized in the national economy. America needs “to hit the pause buttons on these regulations so our businesses can reinvest in the economy,” the candidate said. NCUA has recently approved two, major rules that take effect at the beginning of 2017: the member business loan rule (which goes into effect in January, and is subject to a court challenge by the banking industry), and the new field of membership rule (taking effect in late December or early January). Additionally, NCUA is beginning a process to consider regulations allowing supplemental capital in relation to risk-based capital requirements.


Additional change is likely also in store for the CFPB in the coming months, including throttling back on the pace of regulation and making changes in its structure and leadership. Trump’s campaign pledge for a regulatory moratorium could directly affect new rules from CFPB on payday lending, proposed rules on debt collection and others in the pipeline. Further, as the result of an appeals court ruling last month affecting the structure of the consumer agency, Trump as president will have the power to remove CFPB Director Richard Cordray at will, rather than only “for cause.” However, the bureau is expected to challenge the ruling by Nov. 25 (successfully obtaining a stay of the court’s decision while it seeks an appeal may be enough to keep the new president from replacing Cordray in the short run).

Republican control of the federal government generally may also give new impetus to the Financial CHOICE Act (passed by the House Financial Services Committee last summer), which would essentially restructure the CFPB and reconfigure much of the financial regulatory system. The bill includes provisions increasing the size of the NCUA Board to five members, and subjecting its annual budget to congressional oversight. NASCUS has recommended to Congress – whether or not it expands the size of the NCUA Board – that it also designate at least one of the NCUA Board positions for a candidate who has served as a state credit union supervisor. NASCUS’ Ito also mentioned the recommendation during her remarks at the NCUA Board Briefing Oct 27.


NASCUS July 13 letter supporting CHOICE, 5-member NCUA Board


A revised budget for 2017-18 – and the overhead transfer rate – are both on the agenda for consideration by NCUA Board during its regular, open meeting Nov. 17 at agency headquarters in Alexandria, Va. The board is considering adoption of a $299.2 million budget for 2017 (2.8% higher than its 2016 spending plan), and a 2018 budget of $313.1 million (a 4.6% bump from the 2017 plan it is considering). Central to NCUA’s spending plan is how much of it is made up of funds “transferred” from the National Credit Union Share Insurance Fund to cover “insurance-related” operations (or “overhead”). For 2016, the board set an “overhead transfer rate” of 73.1%, which NASCUS criticized. “By shifting virtually all safety and soundness-related expenses to the share insurance fund, it seems to signal that the agency is foregoing responsibility for safety and soundness in its role as the charterer and prudential supervisor of federal credit unions,” NASCUS President Ito said.

To NCUA’s credit, in January it issued a comment call on the OTR (which followed the publication, in summer of 2015, of a legal analysis by NASCUS which found the OTR is subject to formal notice and comment under federal law). Disturbingly, however, the NCUA Board agreed to delegate the power for setting the OTR to the agency’s Office of Examination and Insurance. NASCUS objected to that delegation last year, and again in October during the board’s budget briefing. In other action scheduled for next week’s meeting, the board will consider a rule about the Community Development Revolving Loan Fund; hear a report on the share insurance fund, and; review the SIF equity ratio projections and 2017 premium range.


Lucy Ito written statement for Oct. 27 NCUA Budget Briefing


Ballot measures legalizing recreational or medicinal use of marijuana (or expanding existing medicinal use) were approved byResults nov. 16 ballot initiatives voters in eight states, but rejected in one, as a result of Tuesday’s election. Voters in California, Maine, Massachusetts and Nevada approved measures allowing for recreational use of cannabis; Arizona voters rejected it. Meanwhile, voters in Arkansas, Florida, Montana and North Dakota approved medicinal use of the substance (Montana was an expansion of existing law).

More than half of the states (28, and the District of Columbia) have now legalized recreational or medicinal – or both – uses of marijuana for their jurisdictions. However: The substance remains classified as a Schedule 1 drug (the same as heroin), a rating that was reiterated by the federal Drug Enforcement Agency in the summer, which hampers the ability of businesses serving the legal marijuana trade to receive services from financial institutions (including credit unions), which are reluctant to provide services out of fear of violating federal drug laws. While NASCUS took no positions with regard to the ballot measures, the association supports the rights of states to make and enforce their own laws and to foster public safety, and supports federal legislation which would clarify the permissibility of financial institutions to provide financial services to state-authorized marijuana businesses.


Principles-based commercial loan risk management, implementing a commercial credit risk rating system, outsourced commercial lending programs and their pitfalls and potential are among the sessions on the agenda for the Member Business Loan School, Dec. 6-7, in Nashville. Sponsored by NASCUS and the Credit Union Division of the Tennessee Department of Financial Institutions, this two-day session is designed for state credit union practitioners and examiners nationwide to give these state stakeholders the latest opportunity to become intimately familiar with the new NCUA MBL rule (which takes effect in January), and how it affects credit unions in their respective states. The comprehensive program is designed to ensure that participants are in line with all of the changes, and what they mean, for their organizations’ operations by the January implementation date. Among the presenters at the school: Vincent Vieten, Senior Credit Specialist, NCUA; Molly Snody, Director of Business Advisory Services, Pennsylvania Credit Union Association; Brian Lauer, Messick & Lauer, and; Bill Beardsley, CEO, Michigan Business Connection.


Agenda, registration; Dec. 6-7 MBL School, Nashville

BRIEFLY: BSA Conference opens; Directors College Dec. 8 in CT

The NASCUS/CUNA BSA Conference opens in San Antonio on Sunday, with nearly 300 credit union and state supervisor compliance and executive staff in attendance. The event, which ends Wednesday, provides a forum for discussing and learning about the very latest on the complex federal BSA laws … NASCUS and the Connecticut Department of Banking host the 2016 Connecticut Directors' College, Dec. 8, in the Hartford area. Open to all area credit union directors and senior staff, the one-day session offers informative sessions on fraud risk, Cybersecurity Assessment Tool (CAT), board and supervisory committee fiduciary duties, the new CECL accounting standard - and more. Featured speakers include NCUA Board Chairman Rick Metsger, Connecticut Banking Commissioner Jorge L. Perez, NASCUS’ Lucy Ito and Connecticut Credit Union League President and CEO Jill Nowacki.


NASCUS/CUNA 2016 BSA Conference (Nov. 13-16, San Antonio)

NASCUS 2016 Connecticut Directors College Dec. 8, 9 a.m. to 3:30 p.m.; Rocky Hill

Fall calendar '16

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