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Hotline at 1-800-778-4806 or by email at
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Ben C. Hardaway, Editor, firstname.lastname@example.org
National Credit Union Administration
1775 Duke Street, Alexandria, VA 22314-3428
CREATING A FAIR AND BALANCED APPROACH
BY J. MARK MCWATTERS, NCUA BOARD MEMBER
As we begin a new year of challenges, a
goal of the NCUA Board should be to look
back and review the actions we have taken
to determine if they provided “reg relief.”
There are a number of examples of major NCUA regulatory
requirements that were addressed or begun last year. The risk-based capital rule remains an unnecessary regulation that will
burden covered credit unions, as well as the agency. Besides
imposing higher risk-based capital requirements for well-capitalized credit unions, versus those that are adequately
capitalized, covered credit unions will have to maintain a
capital plan and be subject to examiner demands for even
more capital than the rule requires. Shifting regulatory limits
to examiner discretion will only add to credit unions’
As with the member-business lending proposal, I do not
accept that we cannot provide field-of-membership relief
without breaking the bounds of the Federal Credit Union Act.
Meanwhile, NCUA has still not considered material
improvements to the appeals process for exams, the agency’s
asset threshold for regulatory relief for small credit unions
remains too low and the 18-month exam cycle for well-managed credit unions remains elusive.
Fair and balanced regulation should not be beyond the
capacity of NCUA. To achieve that result, however, we
cannot just label regulatory efforts as relief and commend bad
rules when they are only marginally improved. Nor should
we transform regulatory requirements into examination
directives. The compliance burden will only be compounded
by credit unions’ uncertainty as to what they must do to avoid
negative examiner reactions and examination findings.
NCUA has several carefully defined primary roles, as
determined by Congress, which include regulating federal
credit unions, supervising federally insured credit unions and
overseeing the National Credit Union Share Insurance Fund.
Yet, in studying the Federal Credit Union Act as I have, it is
clear Congress also intended for the credit union community
to grow, allowing consumers and small businesses to have
financial options in addition to banks and thrifts.
From a performance standard, 2015 was a good year for
credit unions. Yet, we will never know how much better it
could have been without the growing regulatory burdens
credit unions face.
To execute the language and purpose of the Federal Credit
Union Act, NCUA must reconcile its legal obligations to
support safety and soundness, while staying out of the way
of credit unions that manage their operational risks as they
respond to members’ needs. This is what the Federal Credit
Union Act directs.
If we continue to operate under the principle that problems
within a few must be corrected by new regulations for all,
most credit unions will continue to be needlessly punished
and the agency’s scope and budget will always grow. If
instead, we focus on how well risks are anticipated, mitigated
and contained—both at the agency- and system-level—credit
unions that address their risks well will have added flexibility
to serve their communities, and the agency will have more
resources, without exacting more funds from credit unions,
to address material safety and soundness issues.
Like every worthwhile endeavor, refocusing NCUA’s
approach needs a plan to maximize the agency’s success. That
is why I have been talking with credit union officials and
using their input to develop a blueprint for supervision that
is truly balanced, consistent with the directives of the Federal
Credit Union Act. You will be hearing more from me on this
throughout the year.
I believe 2016 can be a year in which burdens are reduced,
but we must not delay in improving how we regulate and
supervise, so that when we say regulatory relief, credit unions
will actually experience it.
“Fair and balanced regulation should not be beyond the capacity of NCUA. ”