In These Times, NCUA Should Tweak Reg Flex Not Repeal It
The NCUA has proposed changes to part 742 of the rules and regulations as they pertain to fixed assets, member business loans and investments. Credit unions are of course invited to make comments regarding these proposed changes.
The proposed changes are quite far reaching. They would repeal regulatory flexibility for credit unions in four areas.
To date, only four credit unions have commented on these proposed changes. At this rate it is almost assured that the NCUA will repeal reg flex.
I urge everyone to go to ncua.gov and view the proposed changes. Ask yourself if these changes will affect your credit union now or at some time in the future. Let the NCUA know what you think. If you are currently taking advantage of reg flex don't be afraid to tell of your success. The NCUA cites examples of credit unions that are in trouble supposedly because of reg flex. I believe someone worked overtime finding these bad examples. I don't deny that problems exist, but the NCUA has access to the numbers. They know where the problems exist. They have the authority today to revoke reg flex in specific situations. They need to spend their time and energy on fixing the problem not on penalizing credit unions that are properly using reg flex.
It seems to me that the NCUA needs to reward not penalize credit unions that are properly using reg flex. In these tough economic times, the NCUA can use all the money making credit unions it can find. Someone is going to have to have more income than expenses in order to pay for all of the losses that are looming out there.
I believe that the NCUA's proposed changes are attacking the problem (and, yes, there is a problem) from the wrong end. They propose to eliminate regulatory flexibility for everyone, not just the credit unions that have abused the privilege. As I said in my letter to the NCUA, I believe that they need to, as the song said "accentuate the positive and eliminate the negative."
I strongly believe that credit unions will maintain a higher level of capital and strive to be CAMEL 1 or 2 CAMEL in order to avoid more stringent regulation.
By wanting to repeal reg flex, the NCUA is saying that it was a bad idea. It was not a bad idea. It may need to be tweaked, but the baby doesn't deserve to be thrown out with the bathwater.
David J. Wright
Services Center FCU