Pen, Paper, Stamp and a Little Time

NCUA proposes a rule and asks the credit union industry to provide comments and suggestions about the value of the rule and how it could be made better. CUNA or NAFCU announces the formation of a task force or committee to review the regulatory proposal, seek industry input and formulate conclusions. A credit union league sends a questionnaire out to its members and asks them for responses to certain questions they will then correlate and make public.

The similarity of these actions and the underlying results sought from each are the same. Each action is a solicitation for comment: a request for an expression of thoughts and ideas from those affected by a regulatory proposal or an existing requirement, and an invitation to say what you think and why you think it.

Providing information to a regulatory body is an extremely important activity and it allows the industry to be a contributor to how a regulation is drafted. The opportunity to participate in the process is unique and should be taken seriously by all those affected by the regulation. One should never pass on the chance to participate in a process that shapes how they conduct their business.

It is rare that any action by NCUA creates such interest that the agency is inundated with comment letters. Occasionally, one of the trade organizations will put together a boilerplate letter that credit unions will pull it off their computers, sign and forward to NCUA. While I appreciate all letters that are sent to NCUA, what really can alter any proposed rule the most are the personal comment letters written by CEOs who are on the front lines running their credit unions. Whether you are a CEO who would use the program or not your comments are important to the regulatory process.

The most recent NCUA proposal, asking whether credit unions should be allowed to engage in derivatives, has generated a great deal of discussion. Derivatives are interesting and complicated financial instruments that some large credit unions have asked permission to engage in. If done properly, they can be a benefit to those credit unions. Like member business loans and loan participations, derivatives are not for everybody. In addition, there will be an added regulatory cost.

So not only has NCUA asked should derivatives be permissible, we also want to know how the industry would like derivative regulations structured and how the cost should be assessed—lots of questions requiring a great deal of thought.

This is your opportunity to weigh in on a very important and potentially costly rule. If this proposed rule should move forward, how should NCUA pay for the cost of overseeing this type of program? I expect many comments from the trade organizations, but what I am really interested in are comments from any stakeholders who would be affected by this rule directly. Tell us what is good about this rule, what changes should be made to create a better final rule, and whether credit unions should be permitted to engage in this type of activity at this point in time. Those thoughts are the most important and could make a difference.

Derivatives. To be or not to be? That is the question.

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