Time for Regulatory Restructuring to Take the Dance Floor
At press time, that chamber was scheduled this week to begin its discussion of a series of bills that would revamp how the federal government regulates financial institutions, with the aim of trying to prevent some of the events that triggered the recent financial crisis.
Credit union lobbyists remain most concerned about the provision to create a Consumer Financial Protection Agency.
Supporters say the agency is needed to protect consumers from unfair products and practices while credit unions fear it will add to their regulatory burden.
Credit unions with assets of $10 billion or less wouldn't be subject to an inspection by the CFPA under an amendment likely to be introduced on the House floor when lawmakers consider the measure.
The amendment would raise the exemption level from $1.5 billion and place credit unions at the same level as banks, according to several sources close to the discussions.
All credit unions would have to comply with the rules issued by the new agency, but the examinations would be done by the NCUA for all but those with assets of more than $10 billion. The CFPA could send a representative on the examination if the credit union's practices raise concerns.
NAFCU has long objected to having credit unions subject to any regulation, either direct or indirect, by the CFPA. CUNA has taken a more nuanced position, though both have objected to legislation that provides different regulatory treatment to credit unions based on their size.
There is also concern about a possible residual effect on credit unions of an amendment mandating that national banks comply with state laws, even if they are tougher than federal laws and regulations, unless their federal regulator determines that the state law or regulation places the institution at a competitive disadvantage against state-chartered institutions.
Another component of the package is legislation aimed at giving additional powers to regulate and rescue firms deemed too big to fail. The Federal Reserve would handle the regulation, and the FDIC would administer a fund aimed at rescuing troubled institutions. But lawmakers approved an amendment that would exempt financial institutions with assets of $50 billion or less-which includes all credit unions-from having to contribute to the fund.
It creates a regulatory council on systemic risk chaired by the secretary of the Treasury and made up of representatives of all financial services regulatory agencies, including the NCUA.
The measure also contains a provision allowing Congress to request an audit of all of the operations of the Federal Reserve, including its decisions on monetary policy.
The Senate Banking Committee is scheduled to resume discussions of its measure on regulatory restructuring this week.
Committee members have been meeting in small groups to attempt to iron out the differences between the views of the panel's Democrats and Republicans.
Under legislation unveiled by Senate Banking Committee Chairman Christopher Dodd (D-Conn.), the NCUA would remain a separate agency and not part of a consolidated bank regulator, but credit unions would face an additional layer of regulation and examination by the CFPA.
While the NCUA would remain as the safety and soundness regulator for credit unions, it would lose some of its jurisdiction on consumer issues to the CFPA. The bill mandates that the CFPA assess fees on financial institutions with assets greater than $10 billion, including credit unions and says the agency can assess fees on those with assets of $10 billion and smaller. There is no exemption for smaller credit unions and community banks.
Republicans, led by the panel's top Republican Sen. Richard Shelby (E-Ala.), have expressed strong objections to the CFPA and want the measure to include stronger regulation of government-sponsored enterprises such as Fannie Mae and Freddie Mac.