NCUA committed to regulatory relief

Fazio Testifies on Easing Regulation, Urges Congress to Provide Flexibility

ALEXANDRIA, VA (April 23, 2015) — The National Credit Union Administration works hard to provide regulatory relief and supports several bills that would give credit unions greater flexibility, the agency told the House Financial Institutions and Consumer Credit Subcommittee today.

Larry Fazio, NCUA’s Director of the Office of Examination and Insurance, testified at the Subcommittee’s hearing on regulatory burdens. Fazio’s testimony is available online here.

“The NCUA Board is fully committed to continuing to provide regulatory relief,” Fazio told the Subcommittee members. “More than three-quarters of federally insured credit unions have less than $100 million in assets. These member-owned, locally driven institutions generally have fewer resources available to respond to marketplace, technological, legislative and regulatory changes. NCUA recognizes this and acts continually to fine-tune our rules to remove any unnecessary burden on credit unions whenever that does not compromise safety and soundness.”

NCUA’s Regulatory Relief Efforts

“NCUA employs a variety of targeted strategies to protect the safety and soundness of credit unions, members’ savings, the Share Insurance Fund, and taxpayers,” Fazio said. “We strive to balance maintaining prudential standards with minimizing regulatory burden.”

Fazio pointed to several examples of the agency’s efforts to ease regulation, including the Board’s recently proposed rule to increase the asset ceiling for “small” credit unions to $100 million from the current $50 million. The change would provide three out of four credit unions with special consideration for relief in future rulemakings. The agency is currently working on easing rules on secondary capital, member-business lending, fixed assets, asset securitization and fields of membership.

Next week, Fazio said the NCUA Board will finalize a rule to simplify how federal credit unions add groups to their fields of membership. According to Fazio’s written statement, this final rule will include substantially more regulatory relief than the proposed rule as NCUA responds to the comments received.

During the past three years, Fazio said, NCUA, through its Regulatory Modernization Initiative, has taken 15 actions to cut red tape and provide relief to thousands of credit unions, including exempting small credit unions from certain regulations, facilitating more than a thousand new low-income credit union designations and establishing an expedited process for examinations at smaller credit unions.

NCUA’s Comments on Pending Bills and Priorities

Turning his attention to legislation, Fazio advised Congress to provide regulators with rulemaking flexibility to allow them to scale rules based on credit unions’ size and complexity. He expressed the agency’s appreciation for lawmakers’ efforts to enact laws last year to provide share insurance coverage for lawyers’ trust accounts and enable federally insured credit unions to offer prize-linked savings accounts.

Congress should also consider legislation to enable NCUA to examine third-party vendors, Fazio said. That would provide credit unions with an additional measure of regulatory relief. The change could easily save credit unions and NCUA valuable time by eliminating the need to examine and mitigate the same issue repeatedly at hundreds of credit unions.

Fazio said NCUA supports several targeted, bipartisan bills, including:

  • R. 989, by Rep. Peter King, R-N.Y., and Rep. Brad Sherman, D-Calif., to allow healthy, well-managed credit unions to issue supplemental capital that will count as net worth,
  • R. 1188, by Rep. Ed Royce, R-Calif., and Rep. Gregory Meeks, D-N.Y., to modify the cap on member-business lending, and
  • R. 1422, by Rep. Royce and Rep. Jared Huffman, D-Calif., to provide parity between credit unions and banks on the treatment of one- to four-unit, non-owner-occupied residential loans by exempting such loans from the member-business lending cap.

NCUA would also support legislation to permit all federal credit unions to expand their membership by adding underserved areas, Fazio said. The agency is also working to identify other statutory proposals related to updating field-of-membership limits.

NCUA is the independent federal agency created by the U.S. Congress to regulate, charter and supervise federal credit unions. With the backing of the full faith and credit of the United States, NCUA operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of more than 99 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions. At and Pocket Cents, NCUA also educates the public on consumer protection and financial literacy issues.

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