A perspective from the head table

It is an interesting perspective to view a room full of people seated behind an elevated table. From that location you can see everyone’s face and their immediate reaction to comments, questions and responses. I had that unique opportunity when I sat with the rest of the NCUA Board at the July 10 Listening Session held in Chicago, Illinois.

I always enjoy traveling back to my home town of Chicago to participate in an event where credit union people are in attendance. At this filled-to-capacity meeting, credit union representatives from Illinois made up over half of the audience. It was good to again see people I have been working with for many years. I had an opportunity to personally talk with many of them before and after the event.

The purpose of the session was to allow anyone who wished to offer comments or suggestions or to ask questions about any subject they wished. However, almost everyone there had only one subject on his or her mind—the proposed risked-based capital rule.

The session began with remarks by Chairman Matz followed by my opening comments and those of Board Member Metsger. The attendees, as they always do, listened intently and courteously to what each of us said. The Chairman laid out the format of the meeting and tried to alleviate the fears many have of the rule by saying there will be changes and that everything was on the table. I tried to inject some humor into the meeting. I also offered my views that I believed much needed to be changed and was confident it would be.

Following the Board remarks, each table in the audience discussed their concerns and selected a spokesperson to voice what they felt needed to be said. When that was done, the comments for the Board to hear began.

These are my observations of the session. They do not represent the opinion of the Board or NCUA and any resemblance to actual or real people is coincidental.

First, the mood of the audience was one filled with tension. The looks on the faces of those in attendance was of concern that even though they spoke no one was really listening. They felt that they needed to be there because if they were not it would seem that the industry was not unified and therefore ready to accept what the regulator proposed.

Second, as the questions were asked and replies made to those questions, the audience was fully engaged.

Third, many of the remarks were similar in scope with heavy emphasis on risk weights, who can direct a credit union raise more capital, a longer phase-in period and the request for another comment period after NCUA has made it revisions.

Fourth, it was not always a comfortable feeling for everyone there as the session progressed. An edgy feeling was present in the room. There was a lack of belief in what would be done. The trust factor seemed to be missing.

Fifth, three hours after it began it was over. Granted time did not allow for everyone to talk, but I sensed the major concerns were stated by those who had the opportunity to speak. The discussion continued after the listening session ended where many attendees approached me to express their frustration with the agency.

Now, being a descendant of the prophet Moses, many times removed, here is what I think is and should happen. Keep in mind this advice is being offered free of charge so take it for what it is worth.

First, people, and especially the NCUA Board, are listening. There will be substantial changes to what has been proposed and specifically in the areas of concern.

Second, it should be an easy determination whether the changes made have altered the proposed rule in such a substantial way that prior to final Board consideration it should be put out for an additional comment period. Given everything that has transpired with this rule, we did not get it right and it would be refreshing to do the right thing for the right reason for our stake holders and have a short second comment period.

Third, risk-based capital is coming. Credit unions, their trade associations and interested parties need to work with the regulator to get it right. There is ample room for common ground and the passage of a rule that will enable the regulator to be comfortable with safety and soundness and for the industry to continue to provide valuable financial services to their members.

Forth, transparency is essential. NCUA will more fully explain how they reached conclusions in the next step. And if the industry believes there still exists errors or discrepancies, they must provide justified reasoning behind those concerns. All parties need to fully substantiate what they advocate.

Fifth, all parties must continue to talk and then pause to listen.

In 2008, we faced the worst crisis credit unions have ever had to confront when the corporates failed. Because the regulator and regulated talked and listed then, we have a strong and vibrant credit union system now. We are not in a crisis mode now which should make this task easier, keep the lines of communication open, work together to resolve conflicts, make no rush to judgment and get it done right.

NCUA will do the right thing.

Michael Fryzel

Michael Fryzel

Michael Fryzel is the former Chairman of the National Credit Union Administration and is now a financial services consultant and government affairs attorney in Chicago. He can be reached at ... Details