NASCUS Makes FISCU Regulatory Relief Recommendations to NCUA Chairman

Oct. 17, 2011 - Recently, the National Credit Union Administration (NCUA) Chairman announced a Regulatory Modernization Initiative aimed at providing some regulatory relief for credit unions. NASCUS recommended additional reforms for federally insured state-chartered credit unions including consolidating insurance rules into one section and improvements to online resources.

Among the regulatory relief proposals, Chairman Matz intends to extend six of the Reg Flex provisions to all federal credit unions (FCUs) and to continue to support supplemental capital access for credit unions. NASCUS is supportive of these efforts and encouraged the agency to consider additional regulatory relief.

First, NASCUS urges NCUA to create a task force with NASCUS regulators to review NCUA rules applicable to FISCUs to determine where relief may be provided. For example, wherever NCUA rules require submission for approval from a Regional Director (RD), provisions should be adopted to provide that the absence of a response from the RD within the stipulated time frame is akin to approval. 

Also, NASCUS has long urged NCUA to ease the regulatory burden on FISCUs by changing the format of its rules in Subpart B of Part 741. Unlike Subpart A, Subpart B does not state the text of rules applicable to FISCUs, but merely incorporates by reference rules outside of Part 741.  We strongly recommend that the NCUA incorporate the text of its insurance rules into Part 741, Subpart B in their entirety rather than by reference. The complicated nature of NCUA's rules makes it difficult for FISCUs, as well as state and federal examiners and other interested parties, to easily discern which insurance rules, or in some cases portions of such rules, apply to FISCUs. 

Further, NASCUS recommends that NCUA more promptly incorporate new rules or changes to its online version of regulations. Currently, NCUA’s website includes a complete version of its rules in effect as of March 2010. But, in addition, readers must read 30 other final rules in order to understand the changes to NCUA rules since March 10, 2010. NASCUS suggests that changes or new rules should be incorporated within a two week time period to facilitate greater understanding by all interested parties of rule changes.    

NCUA could also relieve the burden on healthy FISCUs of multiple examination contacts in a single year by re-emphasizing reliance on state examinations. Last year, NCUA announced its intention to send federal examiners annually to every FISCU with assets in excess of $250 million, regardless of the CAMEL rating or condition of the institution.  When NCUA is unable to accompany the state regulator on the scheduled primary examination of the FISCU, the agency has indicated its intention to schedule a separate federal onsite insurance review. NASCUS believes this policy should be reconsidered and NCUA should rely on the state examination and spare the FISCU the disruption of a second examination.

To view our full letter, follow this link.