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Oct. 12, 2018

NASCUS will voice state system view at NCUA budget briefing next week

The required-by-law budget briefing for NCUA is scheduled for Wednesday at agency headquarters in Alexandria, Va. – and NASCUS will be at the table voicing its views of the impact on next year’s budget proposal on the state credit union system.

NASCUS Vice President of Communications Shelton Roulhac will offer the NASCUS comments, which will likely include a focus on the budget’s proposed overhead transfer rate (OTR) for 2019.

For next year, the agency is proposing a 60.4% OTR (which is the rate at which NCUA transfers funds from the National Credit Union Share Insurance Fund (NCUSIF) to the agency’s operating budget to cover “insurance-related expenses”). If adopted, the 60% rate would be the lowest since 2014 and would be the third straight year of a reduction in the rate. (The all-time highest OTR was 2016, when it reached 73.1%).

For more than 20 years, NASCUS has been advocating for a fairer and more transparent OTR. “The latest by NCUA – a proposed reduction in the rate by nearly 13 percentage points from the high point of 2016 – is evidence of the state system’s effective voice,” NASCUS President and CEO Lucy Ito said in September when the proposed budget was released by the agency.

The annual public budget briefing was mandated by enactment this spring of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S. 2155). The law also requires the budget be published in the Federal Register, and that the agency solicit and consider public comments about it. Previously (at least since 2016), the agency held the briefings on its own initiative.

Other areas likely to be touched on in the NASCUS presentation include: allocation in the budget for training of state examiners about BCFP rules and initiatives (as well training for NCUA and FDIC initiatives), and; budget allocations to enable state supervisors, credit unions and NCUA to share examination-related information seamlessly to reduce time and cost burdens for all three.

“The annual budget briefing can be an opportunity to demonstrate the partnership among state supervisors, NASCUS and NCUA,” Ito said, “and NASCUS looks forward to the prospect of sharing the state system’s views.”

The briefing is set for 10 a.m. Wednesday (Oct. 17), and will be livestreamed via the Internet. According to NCUA, the board is scheduled to approve a final budget at its Nov. 15 open meeting.

NCUA Posts 2019-2020 Proposed Budget, Sets Oct. 17 Public Briefing


A final rule supplementing risk-based capital regulation for credit unions by delaying the effective date by one year will be considered during a meeting of the NCUA Board next week (Oct. 18), according to the agenda made public Thursday.

The board will also consider a proposal amending Federal Credit Union bylaws, according to the agenda (no additional details were provided).

The final rule on risk-based capital is based on a proposal issued by board Aug 2. It does two things: First, it delays until Jan. 1, 2020, the effective date of the 2015 final rule (which had been slated to take effect the first day of next year), and which revised the agency’s regulations regarding prompt corrective action (PCA). Second, it reduces the number of federally insured credit unions that would be affected by raising the rule’s asset-size threshold for “complex” credit unions from $100 million to $500 million.

When the proposal was issued, the agency said revising the rule’s definition of “complex” exempts an additional 1,026 credit unions from the rule without subjecting the National Credit Union Share Insurance Fund (NCUSIF) to undue risk. (The NCUSIF is the federal fund that insures credit union member shares.) This change means that about 90%, or all but 531, of federally insured credit unions are exempt from the rule, the agency says.

Regarding the “complex” redefinition, the agency said the proposal eliminated two indicators from the previous definition: Internet banking; and investments with maturities greater than five years, where the investments are greater than 1% of total assets. It further revised four of the indicators in the definition, by: substituting “commercial loans” for “member business loans”; replacing “participation loans” with “participation loans sold”; excluding first-lien mortgages from interest-only loans; and narrowing “real estate loans” to “sold mortgages.”

NASCUS voiced support in its comment letter last month for the proposal’s provisions extending the effective date and for raising the rule’s applicability threshold. But, NASCUS also asserted some caveats, particularly about the asset threshold.

“We reiterate our concerns, first raised during the proposed rulemaking in 2015, that while an asset threshold makes for ease of administration, it oversimplifies the complexities of a balance sheet and may cover more credit unions than Congress intended,” the association wrote. NASCUS indicated, under the current $100 million threshold, that nearly 30% of all credit unions would be classified as “complex,” and that it is unlikely Congress ever envisioned that such a broad scope. “At $500 million, or even $1 billion, as a complexity threshold, the rule would more closely align with the spirit of section 1790 of the Federal Credit Union Act,” NASCUS wrote.

Also in its comment letter, NASCUS pointed out a final rule would be the perfect time for the agency to finalize a supplemental capital rule for natural person, non-low-income credit unions. Doing so would, among other things, make good on a 2015 promise to do so before the final RBC takes effect, NASCUS stated. Congress did not speak directly to the calculation of RBC, NASCUS pointed out, and thus NCUA is not limited under the law in defining what constitutes the ratio elements. “Including supplemental forms of capital in the risk-based capital numerator could help protect the NCUSIF from losses by encouraging credit unions to attract additional loss-absorbing forms of capital that they would otherwise forego,” NASCUS wrote.

The meeting is scheduled for Thursday at 10 a.m. at NCUA headquarters in Arlington, Va.; it will be live-streamed via the Internet.

NCUA Board Agenda for the October 18, 2018 Meeting

NASCUS Comments: Proposed Rule: Risk-Based Capital Supplemental Rulemaking

NASCUS Proposed Rule Summary: NCUA Part 702: Risk-Based Capital Supplemental Rulemaking


New summaries of NCUA’s two, recent “letters to credit unions” have been posted by NASCUS, outlining the key issues in both. The letters – on Sharing Bank Secrecy Act Resources (LTCU 18-CU-04), and Merger Rule Provisions, including Member-to-Member Communications (LTCU 18-CU-03) – are summarized for members only.

The former letter focuses on the joint statement issued last week by NCUA and the other federal banking agencies (Federal Reserve, FDIC and OCC) clarifying that banks and credit unions may enter into collaborative arrangements to share resources to manage their Bank Secrecy Act (BSA) and anti-money laundering (AML) obligations more efficiently and effectively. “This means that credit unions may share personnel or other resources to meet compliance obligations,” the letter notes.

The latter letter focuses on the rule issued last week (Oct. 1) on voluntary mergers that, among other things, mandated disclosure of merger-related compensation paid to covered officials of the merging credit union and created a process for NCUA to facilitate member-to-member communications for the merging credit union’s members.

Both summaries – and links to the original letters -- are available (again, to members only) via the NASCUS list of 2018 LTCUs.

NCUA-Released Letters to Credit Unions and NASCUS Summaries


NASCUS supports NCUA’s proposal to clarify its regulations regarding loans and lines of credit to members, but wants to make sure that any clarifications preserve current exemptions for state rules.

At its board meeting in August, the NCUA Board issued a proposal to that it said was intended to “improve clarity and to make compliance easier” with its rules on loans and lines of credit to members. Specifically, the agency said, the board proposed “to make the NCUA’s loan maturity requirements more user friendly by identifying in one section all of the various maturity limits applicable to federal credit union (FCU) loans.”

NASCUS’s comments in its letter were limited to the aggregate borrower limits applicable to federally insured state-chartered credit unions (FISCUs). “NCUA’s rules allow for states to seek an exemption for FISCUs if the state of their prudential regulator promulgates similar rules,” NASCUS wrote. “NCUA should preserve this preemption.”

In federal regulations, NASCUS also wrote, NCUA’s disparate borrower limitations are often difficult for federally insured credit unions to easily locate. The association noted that, for FISCUs, that difficulty is compounded by the nature of Part 741 of agency rules, which incorporates NCUA provisions by reference. “To further clarify which rules apply to FISCUs, NCUA should incorporate FISCU applicable loan limitations in Part 741.203 in their entirety,” NASCUS wrote.

NASCUS comments: Proposed Rule 701 – Loans to Members and Lines of Credit to Members


FCUs may use a written narrative to meet requirements for expanding their membership scope in a community, as long as the narrative demonstrates the institution’s ability for serve the community and intent to serve it an “all of its segments,” NCUA said in a “Letter to Federal Credit Unions” issued this week. However: the agency also told FCUs using the narrative approach that applications must include documentation, including specific details and “clearly demonstrate how the area’s residents interact or share common interests.”

NCUA LTFCU: Requests to Serve a Well-Defined Local Community Using the Narrative Approach


Outreach to financial institutions and regulators following the buzz saw that was Hurricane Michael this week came from federal financial institution regulators and NASCUS, as all worked to assure the financial system and its institutions, members and customers could recover quickly from the storm.

NCUA joined with its counterpart federal banking agencies (Federal Reserve, FDIC and OCC) Wednesday in issuing a joint on supervisory practices regarding financial institutions affected by the fast-moving but destructive storm. The statement covered six areas: lending, temporary facilities, publishing requirements, regulatory reporting requirements, Community Reinvestment Act (CRA), and investments. The letter noted that the regulators “recognize the serious impact of Hurricane Michael on the customers, members, and operations of many financial institutions and will provide appropriate regulatory assistance to affected institutions subject to their supervision.”

Also this week: NASCUS reached out to state supervisors in affected states in the hurricane’s path in the southeast U.S., offering assistance and pointing to compiled resources that might be helpful to their states in recovery. “We are also in frequent contact with impacted state officials and have coordinated with the federal Financial and Banking Information Infrastructure Committee (FBIIC) regarding emergency planning and preparedness,” NASCUS noted.

NASCUS disaster recovery resources

Financial Regulatory Agencies Issue Interagency Statement on Supervisory Practices Regarding Financial Institutions Affected by Hurricane Michael


Ohio was the heart this week of NASCUS Education, as the association (in conjunction with the OH Division of Financial Institutions) sponsored two events – Ohio Credit Union Day, and the Ohio Examiner School. OH CU Day – part of NASCUS’ series of credit union industry days across the country – provided an up-close look at the state regulatory agenda and practices to credit union board members and executive staff, and brought regulators and regulated face-to-face to share experiences and ideas about developing a stronger state credit union system in the state.

The two-day Ohio Examiner School provided a complete look at the ever-changing regulatory environment, with a thorough run-down of the impact on federally insured, state-chartered credit unions from new or proposed federal regulations.

Special thanks to our speakers for these events, including (for the OH CU Day): Brian Knight, EVP and General Counsel, NASCUS; Mick Kless, President and CEO, Compliance Education Institute; David Reed, Partner, Reed & Jolly, PLLC, Jacqueline T. Williams, Director, Ohio Department of Commerce and Mark Eich, Principal, CliftonLarsonAllen LLP. For the OH Examiner School: Brian Knight of NASCUS; David Reed of Reed & Jolly; Stephen Schiltz, Principal, CliftonLarsonAllen LLP; Andrew Eschle, Principal, CliftonLarsonAllen LLP.


There’s much more to come on the NASCUS Education calendar for 2018, as early as next week and through the next two months, including:

  • Oct. 15-19, Michigan Examiners School (Ann Arbor, MI);
  • Oct. 16, Michigan Industry Day (Ann Arbor, MI);
  • Nov. 5-8, NASCUS/CUNA BSA Conference (Louisville, KY.);
  • Nov. 27-28, NASCUS Mortgage Symposium Part 3 (Needham, Mass.);
  • Dec. 4, Tennessee Directors’ College (Nashville, TN)

NASCUS Education and Training 2018 Agenda


Learn more about NASCUS and the benefits it offers to credit unions and other state credit union system players – directly from those who reap those benefits in a Nov. 1 “NASCUS 101,” a no-charge event featuring an overview of the rewards of membership in the association.

Among others, the one-hour event includes comments from active members and representatives of NASCUS leadership. Other segments of the event include those focusing on NASCUS’ unique leadership composition of two groups: state regulator board of directors and credit union advisory council; and the association’s unique membership model that includes state regulatory agencies, credit unions, credit union leagues, and industry partners (associate members). Other segments include those focusing on association accreditation programs, committees, the National Institute of State Credit Union Examination (NISCUE).

Info/registration for NASCUS 101; Thursday, Nov. 1, 2-3 p.m. ET

BRIEFLY: Vega to shift from NCUA to state association; Welcome new members

Sarah Vega, now chief of staff and senior policy advisor to NCUA Chairman J. Mark McWatters, will become the next chief executive of the Cooperative Credit Union Association, the group said Thursday. Vega is a former state regulator (director of the Illinois Department of Financial Institutions) and NASCUS Chairman. No date was given for her start date in the CCUA announcement ...  NASCUS welcomes this week as its latest new members Memorial Credit Union of Chattanooga, Tenn., and Town & Country Credit Union of Minot, N.D. Memorial CU has $7.7 million in assets and approximately 1,600 members; it is led by President and CEO Carol Underwood. is Town & Country CU, is led by President and CEO Jeremiah Kossen; it holds nearly $420 million in assets and counts nearly 19,000 members.

Information Contact:
Patrick Keefe,