Credit Union Regulators to Senate Banking Panel: CUs Are Unique
NCUA Chairman Michael E. Fryzel urged the committee to keep his agency separate from the other financial services regulators, while NASCUS Chairman George Reynolds recommended that the panel preserve the dual-chartering structure.
Fryzel told the Senate Banking Committee that credit unions are "unique and distinct institutions that require a unique and distinct regulator."
Reynolds endorsed keeping the NCUA separate but said lawmakers should be careful not to revamp regulations so much so as to weaken the authority of state regulators.
"Preemption of state laws and the push for more uniform regulatory systems will negatively impact our nation's financial services industry and ultimately consumers," said Reynolds, who is the senior deputy commissioner of the Georgia Department of Banking.
Both testified last Thursday at one of the committee's hearings on regulatory restructuring.
Fryzel said the NCUA's work with state regulators has enabled the agency to "manage risk in an efficient manner," and its insurance fund should remain separate from other insurance funds.
He said the fund is "stable and well functioning" and has an equity ratio of 1.28%.
Fryzel expressed support for creating a systemic risk regulator that would establish broad rules about safety and soundness while letting the NCUA focus on credit unions. He did not specify which government agency should perform that function.
In his opening statement, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) expressed support for letting the FDIC become the risk regulator. He criticized the idea of letting the Federal Reserve have those powers-an idea supported by many, including House Financial Services Committee Chairman Barney Frank (D-Mass.)-because "the instances in which the Fed has failed to execute its existing authority are numerous."
Fryzel told Credit Union Times following his testimony that while the decision is ultimately up to Congress, he would have "no problem" with the FDIC as the systemic regulator as along as the NCUA remains an autonomous agency.
Reynolds urged lawmakers to be cautious when making changes because "it is not the structure of our regulatory system that has failed our country, but rather the functionality and accountability within the regulatory system."
He said Congress should ensure that state regulators have maximum flexibility to regulate credit unions and also reaffirm state legislatures' role as the primary authority to enact consumer protection statutes in their respective states.
In response to a question from Sen. Jack Reed (D-R.I.) about how to ensure that regulators are sufficiently rigorous in their oversight, Reynolds emphasized that "we are not in the business of being cheerleaders for the industry. No bank or credit union in my state would say that about our department."
Reynolds also urged Congress to amend the Federal Credit Union Act to give federal and state regulators the power to provide credit unions access to supplemental capital. He said it "will enhance the safety and soundness of credit unions and provide further stability in this unpredictable market" as well as providing an additional layer of protection to the NCUSIF.