WASHINGTON - Sixty days almost to the minute since the NCUA Board unanimously gave its approval to put board member Dennis Dollar's "Regulatory Flexibility ("Reg-Flex") and Exemption Program out for a 60-day comment period an advance notice of proposed rulemaking (ANPR) (CU Times, March 29), CUNA and NAFCU both delivered their comment letters to the agency outlining their recommendations on the program's suggested eligibility "triggers" and benefits. CUNA commended Dollar for his "vision and leadership" and described Reg-Flex as being "one of the most important initiatives the agency (NCUA) has undertaken in recent years." The association supports NCUA's requirement that Reg-Flex-qualifying CUs demonstrate a CAMEL I or II through two consecutive examination periods. Beyond that, the trade association listed and discussed in detail 20 suggestions on how NCUA can further mitigate CUs' regulatory burden without jeopardizing the safety and soundness of participating credit unions or the NCUSIF. They are: * the 9% net worth requirement to qualify for Reg-Flex status should be reduced to 7%, which is the well-capitalized level under prompt corrective action (PCA); * CUs that meet the net worth and CAMEL requirements should be allowed to benefit from Reg-Flex without approval from NCUA; * Reg-Flex CUs should qualify for favorable treatment under prompt corrective action; * Reg-Flex CUs should qualify for a longer examination cycle, like every 18 months, instead of annually. Another alternative would be to reduce the scope of the exam every other year. * Reg-Flex CUs should not be subject to examiner guidelines limiting real estate lending; * Reg-Flex CUs should not be constrained by certain mortgage lending limits; * Reg-Flex CUs should be exempt from loan maturity limits; * Reg-Flex CUs should be exempt from the loan-to-value ratio requirements for member business loans; * Reg-Flex CUs should be exempt from the limit on delegation of investment decisions to an individual other than an employee or official of the CU; * Reg-Flex CUs should have expanded investment authority; * Reg-Flex CUs should be exempt from the limitations under the fixed assets rule; * Reg-Flex CUs should have expanded authority for the purchase and sale of eligible obligations; * Reg-Flex CUs should be exempt from the restrictions on public unit funds and, for a low-income CU, limits on nonmember shares; * Reg-Flex CUs should be exempt from certain leasing requirements; * NCUA should consider incentives for all FCUs that expand into low-income or underserved areas; * NCUA should eliminate the requirement that a federal credit union's net worth must be at least 6% to add select employee groups; * The rule on charitable donations should be removed for all CUs; * Record retention requirements should be eased for all CUs; * Residential and member business real estate appraisal requirements should be lessened for all CUs; * NCUA should allow more flexibility for CUSO activities. CUNA also requested NCUA to address the program's effect on federal insured state-chartered credit unions, recognizing the ramifications of Reg-Flex on state-chartered credit unions. NAFCU's shopping list outlined in its own letter to NCUA was much shorter - only three items. While agreeing with CUNA concerning the inappropriateness of the 9% net worth ratio figure as a determinant of a well-capitalized CU and the classification of well-capitalized under Part 702 of NCUA's Rules and Regulations concerning prompt corrective action, NAFCU took a 90-degree turn from CUNA concerning the Reg-Flex CAMEL I or II requisite. NAFCU does not dispute that NCUA use the PCA net worth criteria and CAMEL code as the primary determinant of Reg-Flex eligibility. The association though emphasizes that "the requirement for a CAMEL I or II in management is not necessary and should be removed from the eligibility requirements. "Management performance is considered in the credit union's overall CAMEL rating; therefore, the additional CAMEL Code I or II requirement for management is redundant," NAFCU wrote. Cognizant that the banks might try to portray Reg-Flex as a vehicle for credit unions to skirt provisions in H.R. 1151, CUNA's General Counsel Eric Richard vehemently denied this is the case. He noted that bank regulators have continuously over the past several years increased banks' regulatory flexibility. Their efforts culminated in the passage of the Gramm-Leach-Bliley Act. "We've never gone so far as to urge stricter regulation of banks and they should do the same with credit unions," said Richard. "Nowhere in (H.R.) 1151 does it mention a minimum net worth ratio figure a credit union must have to be considered well-capitalized." -
ekingoff@cutimes.com
