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June 23, 2017

McWatters testifies before Senate Banking Committee 

The Senate Committee on Banking, Housing and Urban Affairs held a hearing today designed to gather feedback from financial banking regulators on legislative and regulatory recommendations that would “foster economic growth.”  In testimony before the Senate Banking Committee, Acting Chairman Mark McWatters laid out his recommendations for suggested legislative changes.  Those recommendations included a request to Congress to amend the Federal Credit Union Act to provide NCUA with the necessary flexibility to revise regulations and provide regulatory relief to credit unions.  McWatters’ testimony highlighted current limitations to be addressed such as restrictions on the ability of credit unions to obtain supplemental capital, field of membership restrictions and investment limits among other things.

Acting Chairman McWatters also highlighted recommendations from a recent Treasury report entitled, “A Financial System That Creates Economic Opportunities: Banks and Credit Unions” that he thought were “particularly effective in achieving regulatory reform.”  He highlighted recommendations of specific benefit to credit unions such as raising the stress testing requirement threshold for federally insured credit unions from $10 billion to $50 billion.  McWatters also highlighted several NCUA initiatives the NCUA Board is considering to reduce regulatory burden such as call report enhancements, early termination of the Temporary Corporate Credit Union Stabilization Fund and exploring ways to expand the number of credit unions allowed to issue secondary capital instruments. 

When asked by several senators if there was too much redundancy in current banking regulations and whether there should be more coordination among the financial banking regulators to avoid duplication, all regulators agreed that avoiding regulatory redundancy was a goal of their agencies.  McWatters went on to say that having a cost/benefit analysis process for financial regulations was a good thing to do.  But, McWatters noted that such analysis should be thoughtful and that the cost/benefit analysis process should be consistent among the agencies and implemented in a transparent way.

In response to Committee Chairman Sen. Mike Crapo's (R-ID) question about where tailoring of regulations is most needed to foster economic growth, Acting Chairman McWatters responded that allowing all federal credit unions (FCUs) to "add underserved areas" to their fields of membership.  Currently, only just multiple common bond FCUs are able to do so by statute. 

Asked by Sen. Mike Rounds (R-SD) whether he supports the TAILOR Act (S. 366 and H.R. 1116)--"taking Account of Institutions with Low Operation Risk"--Mr. McWatters answered affirmatively, noting that a "shot gun approach" to rule-making that applies to all institutions has unintended consequences that can thwart growth and innovation.  He noted that rules need to have a laser focus that is targeted at the problem. 

Transcript of McWatters' testimony
Treasury report: “A Financial System That Creates Economic Opportunities: Banks and Credit Unions”

OTR on NCUA board agenda today

A request for public comment on the overhead transfer rate (OTR) methodology is scheduled on the agenda for today's meeting of the NCUA board scheduled to start just as NASCUS Report is published this morning. The monthly meeting was moved to today from the typical Thursday to enable Acting Chairman Mark McWatters to testify alongside other federal banking regulators yesterday before the Senate Banking, Housing, & Urban Affairs Committee.  

Today's board action represents the first taken since NCUA first requested comments on the OTR over a year ago.  Forty comments submitted by NASCUS, state regulators, credit unions, trade groups and individuals collectively voiced the need for transparency, fairness, and simplicity in how NCUA allocates its costs to the National Credit Union Share Insurance Fund (NCUSIF). "The NCUA board has a solemn fiduciary responsibility to ensure that strictly insurance-related costs are allocated to the share insurance fund and to ensure a fair allocation of costs to both state and federally chartered credit unions,” said NASCUS President and CEO Lucy Ito.

Other action scheduled at the June 23 board meeting includes:

  • A proposed rule on corporate credit unions;
  • A final rule on a statutory inflation adjustment of civil money penalties
  • A final rule on freedom of information act requests;
  • A final rule, safe harbor (part 709);
  • A board briefing on the agency’s enterprise solution modernization program.

The NCUA board meeting, scheduled to begin at 10:00 a.m. Eastern, is available for viewing via livestream by going to the NCUA homepage and clicking on the provided livestream link.  

NCUA homepage

NASCUS rule summary available - FHLB membership for non-federally insured credit unions

The Federal Housing Finance Agency (FHFA) has published final rules governing Federal Home Loan Bank (FHLB) membership for non-federally insured credit unions pursuant to §82001 of the Fixing America’s Surface Transportation Act (FAST Act). The FAST Act authorized non-federally insured credit unions (NFICUs) to join the FHLBs. Federally insured credit unions (FICUs) have been eligible for membership since 1989.

The final rule makes substantive change from the proposed rule: it allows NFICUs to submit their request to their state regulator for a share insurance determination at the same time as it submits its initial application to the FHLB. This starts the 6 month default timetable if the state regulator is unwilling to make the determination.

The FHFA’s final rule for non-federally insured credit union membership in the FHLB may be read here. The rule is effective July 5, 2017.

Full summary of rule

CFPB prepaid rule - proposed changes

The CFPB is proposing changes to its prepaid final rule that was issued in 2016.  The final rule required financial institutions to limit consumers’ losses when funds are stolen or cards are lost, investigate and resolve errors, give consumers free and easy access to account information, and provide protections if credit is offered. 

The proposed rule addresses concerns raised by prepaid companies about what they have described as “unanticipated complexities” with certain aspects of the rule.  Specifically, the proposal would (i) adjust error resolution requirements; (ii) provide more flexibility for credit cards linked to digital wallets; and (iii) provide for minor adjustments and clarifications to the final rule. 

The CFPB also released an updated version of its small entity compliance guide for the prepaid rule in conjunction with the release of the proposed rule.  Comments on the proposal will be due 45 days after the proposal’s publication in the Federal Register.  

Prepaid proposal 
Prepaid Rule Small Entity Compliance Guide 

NASCUS education events - calendar for 2nd half of 2017

There are still plenty of educational opportunities available during the second half of the year - including a number of Directors' Colleges throughout the country, the BSA Conference in Las Vegas, our Mortgage Symposium in Massachusetts, and the annual State System Summit in San Diego!

July 18: TN Directors' College - Nashville
July 20:  DE/MA/NH/RI Directors' College - Newton, MA
Aug. 14:  OH Credit Union Day - Columbus, OH
Aug. 15-16:  OH Examiners’ School - Columbus, OH
Aug. 29-Sept. 1:  State System Summit - San Diego
Sept. 19:  CO Directors’ College - Denver, CO
Oct. 2-6:  MI Examiners' School - Mt. Pleasant, MI
Oct. 3:  MI Industry Day - Mt. Pleasant, MI
Oct. 4-5:  MI BSA Conference - Mt. Pleasant, MI
Nov. 12-15:  CUNA-NASCUS BSA Conference - Las Vegas
Nov. 28:  NASCUS Mortgage Symposium - Newton, MA

The National Institute of State Credit Union Examination (NISCUE) sponsors training for state supervisors and regulators to foster the NASCUS mission of advocating for a safe and sound credit union system. NISCUE scholarships are available for many of these programs. Please direct any scholarship inquiries to

CUNA Cybersecurity E-School

If you weren't able to attend NASCUS-CUNA's June Cybersecurity Symposium in person, not to worry - CUNA will be conducting 4 live webinars on the topic in the coming weeks. Presentations will include:

  • 07/12/2017 – A Board’s Responsibility in Cyber Risk
  • 07/19/2017 – Cybersecurity Insurance – Can You Transfer the Risk?  
  • 07/26/2017 – Cyber Resilience & Incident Response  
  • 08/02/2017 – Minimizing Threats Involving Malware & Cyber Scams

Also, recordings from a number of the June sessions will be available as well. Topics will include:

  • The Current State of Cybersecurity and Survey of the Threat Landscape 
  • Cybersecurity on the World Stage: International Trends 
  • Beyond Fraud: Combating Cyber-Enabled Financial Crimes 
  • Implementing the NIST Cybersecurity Framework  
  • Ethical Hackers Perspective – 10 Things that Make a Hackers Job Easy 
  • Is it Safe? Understanding the Vulnerabilities of the Cloud
  • What is New in Cybersecurity Litigation and Enforcement? 
  • Cyber Risk Rating an Institution 
  • Do You Know Who you are Dealing With: How Authentication Affects Prevention, Detection, and Response? 
  • Understanding Cybersecurity Vulnerabilities & Protections 

Thanks to the partnership between NASCUS and CUNA, NASCUS members will receive the CUNA member discount pricing. 

CUNA's program information and registration page

BRIEFLY: Welcome to new NASCUS members!

NASCUS would like to welcome some of its newest members:

  • Alta Vista Credit Union, California
  • Christian Financial Credit Union, Michigan
  • Filer Credit Union, Michigan
  • Freedom Northwest Credit Union, Idaho
  • InTouch Credit Union, Texas
  • Lake Michigan Credit Union, Michigan
  • Patelco Credit Union, California
  • San Diego County Credit Union, California
  • State Employees' Credit Union, North Carolina 
  • US Community Credit Union, Tennessee
  • WSECU, Washington
If you would like more information about NASCUS membership, watch the brief video or contact NASCUS VP for Corporate Affairs Doug McGuckin at

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