How NCUA can continue to address credit union concerns
This is a time of change for the credit union movement. CUNA has evolved, and now we watch the NCUA enter its own period of transition, with Chairman Debbie Matz departing this week and Board member J. Mark McWatters awaiting confirmation to the board of the Export-Import Bank.
Critical pieces of CUNA’s operations have advanced over in the past 18 months, including enhancements to advocacy, compliance, and communications. While the transition was at times trying, we learned that an organization can retool and pivot while also maintaining a high level of activity. As the NCUA marches into a new era of governance, it is critically important that board members and staff continue to work on the issues of concern to credit unions. There are many matters we believe must be addressed by the agency, with or without a full board.
Examination consistency and relief
Credit unions continue their impressive track record of safe and sound operation, and, as such, the NCUA should make an extended examination cycle a top priority to provide much-needed and much-deserved relief. We appreciate Mr. McWatters’ recent comments supporting the timely implementation of an 18-month examination cycle. We agree: This can and should be done without unnecessary delay.
Efforts by the NCUA to overhaul its Call Report and AIRES software should also help cut down on examination time. But the agency could find further efficiency by working closer with state regulators. Many credit unions often slog through two rounds of examinations, and better coordination between the NCUA and the states on this front would increase examination efficiency by reducing burdensome overlap.
Modernizations to field of membership rules
We fully support the modernizations proposed by the NCUA to its field of membership rules. Finalizing the proposal will help bring the credit union charter into the 21st Century and narrow the gap between states that have already modernized their charters. The NCUA board will continue to have the complete authority to forge ahead with this rulemaking and should consider important comments by CUNA and other stakeholders that could add even more flexibility to the proposed rule.
Supplemental capital
Credit unions remain the only financial institutions barred from access to supplemental capital, a constraint that makes compliance with the NCUA’s risk-based capital rule even more difficult to manage. To be considered well-capitalized, credit unions must maintain high levels of net worth, which is only accomplished by having sufficient earnings–earnings that can be difficult for not-for-profit financial cooperatives to scratch out, especially in low-interest rate environments. Allowing credit unions to access supplemental capital for risk-based capital, which is within the NCUA’s regulatory authority, would help offset these added capital requirements, easing the burden on credit unions and allowing them to better meet the needs of their members.
Engage with the CFPB
The NCUA must work aggressively with the Consumer Financial Protection Bureau (CFPB) to ensure the Bureau’s quest truly results in tangible consumer protection. CFPB rulemakings intended to regulate the big banks have weighed heavily on responsible-acting credit unions, and as a result, rules purporting to protect consumers in fact have had the opposite effect by straining the safe and affordable options that credit unions provide.
The NCUA is charged with not only regulating and supervising the movement, but also with safeguarding its health. If a separate regulator is working counter to that mission, it demonstrates a clear need for stronger coordination with that agency to ensure the industry isn’t furthered hindered.
We have and will continue to work with the NCUA on these important matters in the weeks and months ahead, regardless of board size. We’re confident the board will continue to function given its history of acting with less than three members. In 2001, for example, Yolanda Wheat and Geoff Bacino’s tenure ended in close succession, leaving Dennis Dollar as the sole member of the NCUA board.
As we learned then, because the Federal Credit Union Act specifies that a majority of the board shall constitute a quorum, a board with only two members, when both present, will constitute a quorum. Ultimately, the NCUA Board is strongest with a full complement of members, and we hope the President and Congress will move swiftly in confirming replacements. However, in the intervening time, the NCUA board remains eminently qualified to carry out its work as usual.
Certainly we appreciate a moratorium on the introduction of new regulations, and it also seems prudent to delay certain non-time-sensitive issues pending the return of a full board. But there is much that can be done not only to finalize issues already in progress, but also to set the stage for the future of credit union governance.
