Areas of state/federal collaboration
outlined to acting NCUA chair

Feb. 7, 2017 -- Supplemental capital and an easily understood overhead transfer rate (OTR) methodology are two issues the state credit union system looks forward to working with new Acting NCUA Chairman J. Mark McWatters, NASCUS President and CEO Lucy Ito said in a congratulatory letter to the new leader.

Additionally, she outlined seven other issues of interest that the state system is ready to assist the new acting chairman in addressing – including whether the agency’s risk-based capital rule should be revisited, and the establishment of a “credit union advisory council” at the agency.

Ito pointed out that President Donald Trump’s swift action in appointing McWatters’ (to date, he is the only federal financial institution regulator appointed by the new president) “sends a clear message that NCUA is a critical agency and that the credit union system and America’s consumers should benefit from your leadership without delay.” She added that NASCUS has welcomed McWatters’ perspectives and “we thank you for consistently acknowledging the role of state regulators and the value of working with them.”

On supplemental capital, Ito noted that NASCUS has long supported the authority for credit unions, and noted that 15 states permit it for their credit unions. “In addition, with their experience supervising a variety of banking and securities industries in addition to credit unions, state regulators will be a valuable resource as NCUA moves forward with capital reform,” she wrote.

Regarding OTR methodology and transparency, Ito said the state system looks forward to NCUA completing the public comment process that was initiated last year, and stands ready to work with the agency toward shared objectives of greater transparency and an easily comprehended OTR methodology. “We also urge the NCUA board to retain its important responsibility of budgetary oversight and its fiduciary responsibility to the fund by not delegating OTR implementation authority to agency staff,” she added.

The NASCUS leader also listed seven additional areas in which the state system is “well positioned to assist” the new, acting chairman of the federal credit union agency. Those areas are:

  • Risk-based capital rule, and re-engaging on the rule’s merits;
  • Establishment of a “Credit Union Advisory Council” at the agency, noting that 22 out of 45 states already do so, and which generate “common sense solutions that simultaneously assure appropriate safety measures and foster credit union growth;"
  • Adoption of “S” (for “sensitivity” to market risk) in the CAMEL rating system – which 16 states have already also done;
  • Greater fraud prevention and detection cooperation between states and the federal agency;
  • Drawing FASB recognition of CU differences, as many state regulators supervise both credit unions and banks (and can readily observe the CU difference that may be discounted by the accounting standards group);
  • Working with Congress on any updates to Title II of the Federal Credit Union Act;
  • Consolidate rules applicable to federally insured, state chartered credit unions (FISCUs) to make it easier for credit unions and state and federal examiners to understand the rules that apply.


Text of Ito letter to Acting NCUA Board Chairman Mark McWatters