Dollar's RegFlex proposal deserves CU support

Motherhood, apple pie, and RegFlex. Could anyone not be for them? NCUA Board Member Dennis Dollar feels that the federal regulator of credit unions should reward well-managed credit unions. He also feels NCUA should make it easier for them to serve their members. And he much prefers that approach rather than just concentrating on hammering those that stray afield from acceptable numbers and other regulatory parameters. Most everyone agrees with his premise. For example, in an entirely unscientific Net poll conducted by Credit Union Times recently, over 80% of respondents agreed with this statement: "Do you agree with (Dennis) Dollar's premise that credit unions that have demonstrated a proven historical performance of safe and sound operations, should be exempt from or have greater flexibility in certain lending restrictions? Another 8.8% "agreed somewhat." Many people I talked to found Dollar's approach refreshing. Some viewed it as a sincere attempt to keep NCUA on track as a safety and soundness regulator and leave the policymaking and management duties up to the credit union volunteer boards and paid staffs. In case you missed it, you may be asking at this point exactly what is RegFlex? Simply put, in Dollar's own words, it is "an earned regulatory flexibility program based upon the realization that each credit union is different and therefore all NCUA regulations cannot be applied to each individual credit union in exactly the same manner." In other words, RegFlex is a risk-based approach to regulation. To qualify, credit unions must meet certain standards. Once they do, they get certain privileges. This assumes, of course, that RegFlex gets enough grassroots credit union level support to convince the other two members of the NCUA Board to eventually vote to implement it. To take advantage of RegFlex, credit unions would have to earn a specified level of net capital strength (9% is the proposed figure) and have a proven risk management ability (CAMEL 1 or 2 for the past two exam cycles). In return, based on RegFlex changes under consideration, these credit unions could be granted a higher fixed asset cap (5% is standard), the removal of certain limited investment restrictions, changes in the charitable contributions restrictions, and adjustments regarding the limits on public funds and certain eligible obligation restrictions. By the way, this is by no means a program aimed at a small number of large credit unions as some skeptics opined initially. If implemented as proposed today, nearly 3,500 credit unions would be eligible for RegFlex. Over 50% of them would be less than $10 million in assets. Whatever any final menu of benefits RegFlex ends up being, the point is that Dollar is trying to do something positive in recognition that most credit unions are well-managed and very successful in serving their members. He's attempting to put a positive spin on the role of the federal regulator to counteract all the negativity that has come out of NCUA in recent years. For that, he should be thanked and commended for his efforts, and supported, too. Yet, there are those who feel RegFlex is much ado about nothing. Who cares about being able to build bigger buildings or give more money to charity, asked one CU CEO when asked to comment on Dollar's proposal. I have a lot more important things to worry about and they have to do with competition, technology, and personnel problems, not modest changes in a few unimportant regulations, he said. Keep in mind, too, that despite the apple pie and motherhood aspects of RegFlex, Dollar came close to not even getting a second, let alone a favorable vote from his NCUA Board colleagues. Chairman D'Amours, for example, used the proposal to get in another shot at his number one agenda item, namely, serving the underserved. He wouldn't go along with RegFlex unless service to the underserved be included as an eligibility criteria. Frankly, it shouldn't really matter at this point what is in RegFlex. What matters is that there is enough good in it that all credit unions can and should support it by submitting comment letters (deadline is May 22nd). What matters is it is something positive coming out of NCUA that gives credit unions the rare opportunity to speak up on something that they can support rather than oppose. There is plenty of time to fine tune it along the intent originally conceived by Dollar. As I view RegFlex, I see it as a rare opportunity for credit unions in the trenches to acknowledge that somebody in a position of authority is trying to do something for credit unions to make life easier for them, not more difficult. That somebody is Dennis Dollar, the only NCUA Board Member who has walked in credit union shoes and understands what it takes to manage a successful credit union. What a shame if credit unions don't acknowledge this positive effort by getting on the comment letter bandwagon. Is RegFlex perfect? Is it everything a group of credit union CEOs, chairmen, and CU lobbyists would come up with if they were asked to design a RegFlex proposal from scratch on their own? Of course not. But knowing how the political, bureaucratic, and regulatory system works, this is as good as it is going to get under the current circumstances. RegFlex may also signal a return to letting credit unions run their own credit unions in the best interests of members and having NCUA concentrate on safety and soundness issues. Who knows, it could also be the first step towards a long list of needed regulatory improvements! Dollar himself probably said it best when he commented: "We can learn a lot by listening to those we regulate about how a more flexible regulatory approach for well-managed, safe, and sound credit unions can help foster innovation and enhanced member service for folks from all walks of life." Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail mwelch@cutimes.com.