Your story, your future: A cooperative approach to regulatory advocacy

“One member, one vote,” has been one of the hallmarks of the credit union cooperative system. “One credit union, one comment” needs to become the hallmark of regulatory advocacy.

With the deadline to comment on NCUA’s Risk-Based Net Worth proposal fast approaching, it’s important for every credit union to tell their story to NCUA through a comment letter.

The cooperative structure of credit unions is at stake. Of the “7 Common Principles of Cooperatives”, one of the core principles is “Autonomy and Independence.” That principle continues to be challenged in the face of a burdensome regulatory environment that continues to deepen.

Credit unions need to understand how NCUA’s RBNW proposal would affect how they serve members in the future—and they need to send a comment letter. Despite credit unions’ growing concern with proposed regulations, many credit unions still don’t take advantage of the opportunity to comment to the regulator. Why?

Many say that only some aspects of a proposed regulation concern them so they do not want to comment on an entire regulation. That’s not a problem because you certainly don’t have to comment on the entire reg. In fact, it’s more impactful if you comment only on the areas that mean the most for your credit union. There are also always some aspects of any proposed regulation that affect most credit unions.

Let’s take a section of NCUA’s RBNW proposal that has widespread concern—how investments are weighted. A one-to-three year government agency is weighted at 50%, while for banks it’s 20%. A three-to-five year agency is weighted at 75% compared to 20% for banks. A five-to-ten year agency is weighted at 150% for CUs and again just 20% for banks. If you go over 10 years with a government agency, you hit 200%, while banks are at 20%. How could the CU risk profile escalate so dramatically, while the bank regulation views any term of an agency at just 20%? It will be a challenge to find when a credit union ever lost money in a government agency, yet the lack of risk doesn’t seem to be factored in. This is a very ubiquitous area for just about any credit union to comment on because agencies are a core part of most portfolios.

Credit unions should not feel obligated to comment on the entire reg. Comment only on the major areas that will impact your credit union, and tell your very personal story about how it will change how you serve members. If the proposed MBL weightings will have a chilling effect on serving your members’ business loan needs, tell that story. Will the mortgage weightings limit your mortgage loan options for members? If so, tell that story. What parts of your business plan for the future will be affected because of RBNW? Tell that story.

I started this column talking about the “cooperative principles” because that’s what’s at stake with a regulatory framework that is too limiting. Credit unions exist to serve their members’ financial needs. If a new restrictive RBNW capital structure comes to light, you will lose flexibility in how you serve your members.

So why else don’t credit unions comment? Many think their comments won’t matter. They will. To its credit, NCUA has shown time and time again that they listen to commenters. NCUA Board Members do take the time to read comment letters and they very publicly call for credit unions to comment any time a major regulation is proposed. The recent derivatives proposal changed considerably from its first iteration after well-crafted comment letters. NCUA’s original loan participation proposal ended up being dramatically different in its final form. There are many other examples. NCUA wants to hear from you. Right now NCUA is hearing the drumbeat of CUNA and the Leagues on RBNW and to their credit have already acknowledged that the proposal will change. How much and how it will change depends on you and your comments.

Some credit unions don’t comment because they think it’s the job of their trade association. No question regulatory advocacy is one of the core roles of CUNA and the Leagues and we attack it very aggressively. It certainly is our job, but like political advocacy, the words that come directly from our member credit unions can mean the most. Credit unions should not rely solely on their trade associations on a regulatory proposal as impactful as RBNW, but credit unions should rely heavily on the CUNA/League system to assist them. CUNA and the Leagues have tremendous resources to help educate you on the RBNW proposal and how to comment to the regulator. Here’s where credit unions should get aggressive. Call on your local league and take advantage of CUNA’s RBNW resources (easily available on the CUNA home page) to better make your case.

Let’s not forget our cooperative roots. We are founded on people coming together for a common cause. As a system, let’s come together on RBNW as we all are vested in how it is finalized. If we are stuck with a limiting framework that gives credit unions less flexibility to meet members’ demands than credit union members lose. More than four million consumers joined credit unions during the last two years. Consumers are embracing the cooperative structure of credit unions, the good deal they get from credit unions, and that credit unions are a viable alternative to the banking system.

This is no time for credit unions to be limited any further than they already are and no time for the regulator to be able to “manage” credit unions through a rigid RBNW framework.

I urge you to comment and urge you to utilize the many resources of the CUNA/League system to get the information you need on RBNW to craft effective letters.

 

Paul Gentile

Paul Gentile

Paul Gentile is President and CEO Cooperative Credit Union Association. The Cooperative Credit Union Association represents the credit unions in Massachusetts, New Hampshire and Rhode Island. The credit unions of ... Web: ccuassociation.org Details