Socrates suggested that humans should do twice as much listening as talking, because we’ve been given two ears and only mouth.
Ernest Hemingway noted that a person learns infinitely more by listening than by talking.
So in that spirit, even though NCUA has completed this year’s series of Listening Sessions, we are still listening.
Our new proposed rule to remove the regulatory limit on fixed assets is open for comments through Oct. 10. And we are still inviting ideas to streamline rules released for review under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA).
Unlike the federal banking agencies, NCUA is not required to reopen its rules for review under EGRPRA. However, we do so voluntarily—because we truly value input from credit union stakeholders.
At the recent Listening Sessions, I reminded participants that the EGRPRA comment period was open, but we hadn’t received any comments yet. That’s certainly understandable. Stakeholders were focused on making their voices heard on our last major rulemaking to resolve lessons learned from the financial crisis: risk-based capital.
During the Listening Sessions and the comment period on risk-based capital, we heard from nearly 2,500 stakeholders—an unprecedented volume of input.
We have now reviewed all 2,056 comment letters; and we will respond to every comment in the preamble to the final rule.
The comment letters raised many valid concerns. Frankly, I share many of those concerns. So during the Listening Sessions, I promised that NCUA would address those concerns in the final rule.
For those of you who could not attend any of the Listening Sessions, here are several major issues that NCUA plans to resolve:
1) We understand all risk weights should be reviewed, and in some cases should be lowered.
We are reviewing all the risk weights and will make changes as appropriate. For example, we are considering lower risk weights in areas such as investments, mortgages, member business loans, CUSOs and corporates.
In particular, I know there is a valid concern among business lenders who were grandfathered by Congress in 1998 and have no member business lending cap. I especially appreciate how critical agricultural loans are to rural communities and how valuable taxi-medallion loans can be in large cities. So we’re working to revise the proposed formula so that credit unions with decades of experience making sound business loans can continue to provide needed capital to serve their small business members.
2) Examiners will not be authorized to raise any individual credit union’s capital requirement.
Any examiners would have to undergo a rigorous process to convince their Supervisory Examiner, Regional Director—and ultimately the NCUA Board—if they believe a credit union needs to hold more capital than is required by regulation. In fact, this process exists in NCUA’s current risk-based capital rule, but it has never been used.
However, we need to more clearly spell out this process in the final rule.
3) The implementation period will be extended well beyond the proposed 18 months.
Commenters and Listening Session participants asked NCUA to collect more granular data in several Call Report fields to obtain more precise measurements of risks. So the extended implementation period must give NCUA sufficient time to update the Call Report system and thoroughly train examiners on the revised rule, while allowing affected credit unions the same length of time to adjust their balance sheets.
These are just a few of the many improvements we are considering as a result of thoughtful feedback. And I can reassure you: All changes to the final rule will be based on what we heard during the comment process.
In the end, NCUA and stakeholders have the same goal: a safe and sound credit union system.
So if you have further ideas to improve other regulations and strengthen safety and soundness, we’re all ears.