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Nov. 9, 2018

NCUA Board to consider budget increases,
funded partially through reduced OTR

Spending plans that would raise NCUA’s total budget by 4.3% in 2019 and 2.7% in 2020 are scheduled for final consideration during the board’s open meeting next week.

If adopted (as expected), the budgets would be partially funded by the lowest “overhead transfer rate” in six years of 60.4%, and a reduction of nearly 13 percentage points since the all-time high set in 2016 (of 73.1%).

NASCUS has long advocated for a fairer and more transparent OTR (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”). NASCUS President and CEO Lucy Ito thanked the board members for acting on the lower rate, and noted the state credit union’s commitment to seeing it come about.

“Sincere thanks to Chairman Mark McWatters and Board Member Rick Metsger to listening to the state system and our concerns about the rising OTR,” Ito said. “A change in the OTR for the third straight year – and well down from the all-time high of just three years ago – demonstrates the importance of the state system raising its concerns about this issue.”

The draft budgets for the agency, released in September and discussed during a public briefing Oct. 15, show the agency’s total budget growing from $320.9 million in 2018 to approximately $334.8 million in 2019 and $343.9 million in 2020. These figures represent combined totals of the operating budget, capital budget, and share insurance fund administrative budget.

The proposed operating budget – also supported with operating fees paid by federal credit unions – increases from $298.1 million this year to $304.4 million in 2019, rising 2.1%. In 2020, it is estimated to rise again to $316.2 million, an increase of 3.9%.

In other action, the board is scheduled to consider a proposed rule on fidelity bonds for federal credit unions. According to the unified federal agenda of regulatory and deregulatory actions, the agency wants to modernize its regulation on fidelity bond coverage for FCUs. The proposed changes, the agency said. will bring the regulation in line with current practices by federal credit unions and bond issuers.

Board Agenda for the Nov. 15, 2018 Meeting


The delay of risk-based capital (RBC) requirements for large “complex” credit unions to Jan. 1, 2020 became official this week when the notice of the final rule (supplemental) was published. The final rule – which supplements a regulation adopted by NCUA in May 2015 – moves the implementation date for the RBC requirement by one year, from Jan. 1, 2019. In addition, the final rule amends the definition of a complex credit union adopted in 2015 for RBC purposes by increasing the threshold level for coverage from $100 million to $500 million.

In its notice filing, NCUA stated that, under this final rule, 98.7% of all complex credit unions are well capitalized. However, the agency points out, the final rule would leave six complex credit unions with total assets of $8.8 billion with a lower capital classification, and a capital shortfall of approximately $71 million. The notice also pointed out that during the one-year delay period, the NCUA’s current prompt corrective action (PCA) requirements will remain in effect.

According to the Federal Register notice, the changes for the RBC rules provide covered credit unions and NCUA with “additional time to prepare for the rule’s implementation, and exempt an additional 1,026 credit unions from the risk-based capital requirements of the 2015 Final Rule without subjecting the National Credit Union Share Insurance Fund (NCUSIF) to undue risk.”

The PCA requirements adopted three years ago replaced the risk-based net worth ratio then in effect with the new RBC ratio for federally insured credit unions, which the agency called comparable to the regulatory risk-based capital measures used by the federal banking agencies: the Federal Deposit Insurance Corp. (FDIC), Federal Reserve, and Office of the Comptroller of Currency (OCC).

Federal Register notice: Risk-Based Capital


NCUA has addressed and closed 13 recommendations remaining from the two previous years for improving its information security program and will be reviewing one final, outstanding recommendation in 2019, according to an Oct. 31 report of the agency’s inspector general office released this week.

The NCUA OIG engaged the firm CliftonLarsonAllen LLP (CLA), according to the report, to conduct its 2018 Federal Information Security Modernization Act review, which offers 10 more recommendations for improvements. Those address the continuous monitoring program; security impact analysis for system changes (no such analysis was documented); personnel background investigations not yet completed; and remaining network vulnerabilities.

The report notes that CLA evaluated the agency’s information security and privacy management programs through interviews, documentation reviews, technical configuration reviews, and sample  testing. This year, CLA also conducted a vulnerability assessment of NCUA’s network. CLA evaluated the NCUA against such laws, standards, and requirements as those provided through FISMA 2014, the E-Government Act, National Institute of Standards and Technology (NIST) standards and guidelines, the Privacy Act, and Office of Management and Budget (0MB) memoranda and privacy and information security policies.

The outstanding recommendation yet to be closed was that the agency’s system owners, with its Office of the Chief Information Officer, document and implement role-based account management procedures, including – but not limited to – authorizing, creating, modifying, disabling, removing, logging and reviewing system accounts in accordance with NCUA’s policy. A portion of this work was done, the report stated, but recommendations for improving on that weren’t completed in time for the 2018 report and will be addressed in next year’s report.

NCUA OIG-18-07 FY2018 Independent Evaluation of the National Credit Union Administration’s Compliance with the Federal Information Security Modernization Act of 2014 (Oct. 31, 2018)


The payday lending rule’s effective date of Aug. 19, 2019 has been stayed by a federal court, in light of the Bureau of Consumer Financial Protection’s (BCFP, formerly known as the CFPB) decision to “reconsider” its rule by early next year.

U.S. District Court Judge Lee Yeakel ruled Tuesday that “to prevent irreparable injury a stay of the Rule's current compliance date of August 19, 2019, is appropriate.” However, the judge (ruling from the federal court for the Western District of Texas (Austin Division)) declined the request of the BCFP and its Acting Director John (Mick) Mulvaney to stay the August 2019 compliance date until 455 days “from the date of final judgment in this action.”

Yeakel also continued a stay on litigation over the rule (formally known as the “Payday, Vehicle Title, and Certain High-Cost Installment Loans”), which he ordered last summer. “As the Bureau has publicly announced it plans to revisit portions of the Rule, including the compliance date, the court will adjust the conditions and timing for the parties to file periodic joint status reports,” Yeakel wrote.

On Oct. 26, the BCFP stated (in a blog post; no other official statements have been released by the agency) that proposed rules that will “reconsider” its rules regarding payday lending are expected to be issued in January. The bureau said then that it would make final decisions regarding the proposal’s scope closer to its issuance.

However, the agency said, it only plans to propose revisiting only the “ability-to-repay provisions” and not the payments provisions. The bureau statement said it was making that distinction “in significant part because the ability-to-repay provisions have much greater consequences for both consumers and industry than the payment provisions.”

U.S. District Court Judge Lee Yeakel ruling on payday lending rule effective date


The BCFP and the Federal Housing Finance Agency (FHFA) Thursday released a new loan-level dataset that provides insights into borrowers’ experiences in getting residential mortgages. The dataset, designed for public use, was collected through the National Survey of Mortgage Originations (NSMO), a component of the National Mortgage Database (NMDB), the first comprehensive repository of detailed mortgage loan information. The survey was conducted jointly by the two agencies; FHFA oversees Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

The database, designed to support policymaking and research efforts and to help regulators better understand emerging mortgage and housing market trends, was launched in 2012 to fulfill requirements of the Housing and Economic Recovery Act (HERA) and the Dodd-Frank Act. HERA mandated that FHFA conduct a monthly mortgage survey of all residential mortgages, including those not eligible for purchase by Fannie Mae and Freddie Mac. Dodd-Frank mandated that the BCFP monitor the primary mortgage market, in part through the use of the survey data.

Bureau of Consumer Financial Protection and Federal Housing Finance Agency Release National Survey of Mortgage Originations Dataset for Public Use 


A new, limited purpose financial institution that would be both a credit union service organization (CUSO) and limited-purpose bank in order to provide fiduciary services (including trusts) was approved this week in Michigan by state regulators. According to a release from Credit Union Trust, the new entity will open for business in the first quarter of next year. “It is the first such entity in the state and is being established to serve the needs of Michigan credit union members,” the CU Trust release stated. “While credit unions routinely provide a range of wealth management services for their members, they were unable to directly provide fiduciary services such as trusts, until a 2016 change in Michigan law.” The entity was organized, the release said, by seven Michigan-based credit unions: Alpena Alcona Area (Alpena), Community Choice (Farmington Hills), ELGA (Burton), Frankenmuth (Frankenmuth), Honor (Berrien Springs), Members First (Midland) and Team One (Saginaw). The entity (to be called Credit Union Trust) will be regulated by the Michigan’s Department of Insurance and Financial Services, Office of Banking, the release stated.


Hundreds of credit union, state regulator and association compliance professionals attended this week’s NASCUS/CUNA Bank Secrecy Act (BSA) Conference in Louisville, Ky., to hear presentations and engage in discussions and dialogue around a wide variety of topics related to BSA, anti-money laundering (AML) statutes and regulation. Among the topics addressed at conference (specifically, by NASCUS’ Brian Knight): Financial Crimes Enforcement Network’s (FinCEN) beneficial ownership rule; enforcement actions; human trafficking; elder abuse; cannabis banking; crypto currency; and de-risking. Thanks to all of our speakers and sponsors for making this year’s event a complete success.

This year’s conference marked the 14th year of partnership between the two organizations in sponsoring the meeting. And that sponsorship will continue to 2019, when the NASCU/CUNA BSA/AML Certification Conference will be held in Tempe, Ariz. (Nov. 19-21).

However, you don’t have to wait for a year to take part in a top-notch BSA program: In April, NASCUS and CUNA are sponsoring (in conjunction with the Ohio Department of Commerce) a BSA conference in Columbus, Ohio. The two-day program April 23-24) will include presentations on will include cannabis, money-service businesses, cybersecurity, elder abuse – and more.

Information/Registration: NASCUS/CUNA BSA (Ohio), April 23-24


Nevada credit union regulator George Burns is a prominent voice in a Nov. 1 Nevada Business magazine article discussing “the business of credit unions.” Burns, commissioner of the Nevada Financial Institutions Division (NFID), said credit unions may differ from banks in structure and business model, but “they’re still depository institutions, so safe and sound is still safe and sound.” Burns also touched on the dual-chartering nature of the credit union system, including the roles of federal and private insurance. “Nevada is one of only 10 states that allows, by law, private insurance, and five of our eight are currently privately insured,” said Burns. “They’re insured by the only private insurer in the country, ASI, American Share Insurance.” The article notes that Nevada credit unions are comparable in their financial ratings to that of the state’s banks. “They’re all operating in a safe and sound, satisfactory condition,” Burns said of credit unions, “and they are subject to similar evaluations as banks.” The Nevada commissioner also noted that “there’s a place for both credit unions and banks in our financial industry,” said Burns. “It’s something that’s very essential and gives the public a choice.

The Business of Credit Unions: The “Own-Your-Own” Financing Institution

BRIEFLY: Two new ‘NASCUS 101’ sessions set for 2019

The unique leadership composition of NASCUS (through state regulators and credit unions); the association’s distinctive membership model that includes state regulatory agencies, credit unions, credit union leagues, and industry partners (associate members); association accreditation programs, committees, the National Institute of State Credit Union Examination (NISCUE) – and more will all be on the agenda for the 2019 series of NASCUS 101 webinars, set for spring and fall. This year, the webinars drew more than 100 participants each – and 2019 promises to draw just as many if not more. The first of the one-hour sessions is set for April 25; the second for Oct. 24; both events will be held at 2 p.m. Watch this space for coming information about registration.

NASCUS 2019 Education Agenda (and NASCUS 101 dates)

Information Contact:
Patrick Keefe,