At the recent NAFCU Congressional Caucus, Chairman Debbie Matz expressed a plan for regulatory improvement by NCUA. She addressed possible changes in certain regulations and a desire for a more open and transparent process that will allow for the credit union industry to know well in advance what rules are being reviewed or proposed so that there is adequate time for research, review and comment.
Regardless of the subject of the speech by the chairman of the NCUA, there is always an immediate analysis of the words spoken and an analysis of what was said. Similar to when the president speaks and immediately following, the news commentators tell us what they believe he really said. Chairman Matz’s speech has been similarly dissected and analyzed.
Not to say that individuals should not express their views on any subject affecting credit unions, the more dialog the better. However, a more realistic and cautious approach would be to take a wait-and-see attitude as a number of commentators have. They believe the proof is in the pudding.
For my part, having worked with the chairman for over two years, I support her ideas to make the job we do at the NCUA better and to interact with the industry to an even greater degree.
In January, President Obama identified a few problems concerning the regulatory environment, and he sent out an executive order with thoughts and directives on how to deal with them. This executive order was entitled “Improving Regulation and Regulatory Review” and was written particularly for executive office agencies. He followed this up on July 11 with another executive order, which extended the first to independent agencies such as the NCUA.
I quote from the first executive order: “Our regulatory system must protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness and job creation. . . . It must allow for public participation and an open exchange of ideas. It must promote predictability and reduce uncertainty. It must identify and use the best, most innovative and least burdensome tools for achieving regulatory ends.
"It must take into account benefits and costs, both quantitative and qualitative. It must ensure that regulations are accessible, consistent, written in plain language and easy to understand. It must measure, and seek to improve, the actual results of regulatory requirements.”
Imagine for a moment a new Army recruit after a hard day taking orders hears this one from his sergeant: “Go to the mess hall and eat your dinner.” Sweet are the words of an order you can embrace. As a regulator, I have no quarrel with the paragraph from President Obama I just quoted. In fact, I agree wholeheartedly with it.
Let me point out a few other portions of President Obama’s two executive orders.
“Regulations shall be based on the open exchange of information and perspectives among state, local and affected stakeholders in the private sector and the public as a whole.... [An] agency shall afford the public a meaningful opportunity to comment through the Internet on any proposed regulation with a comment period that should generally be at least 60 days.” In addition, “agencies shall consider how best to promote retrospective analysis of rules that may be outmoded, ineffective, insufficient or excessively burdensome.”
The NCUA has studied these two presidential executive orders, and I believe that the NCUA is now and has been in compliance with them. In fact, other agencies will be moving up to meet NCUA standards.
Regulation is a big subject and a sensitive one. It always has been and it always will be. Regulation, of course, is nothing more than mutual aid and protection. We sit down together and identify problems. We discuss means of dealing with them. We come to a consensus on what to do about them. Then we agree to all abide by the solutions. Some people always think some solutions are too cautious, and some that more stringent solutions should have been adopted. It’s always this way. It’s important to keep our eyes on our ultimate goal. If it is safety, you tend to have more cautious rules; if it is growth and innovation, you tend to have fewer. With credit unions, of course, it is a mixture of safety, growth and innovation.
Part of President Obama’s executive orders asks for a review of existing regulations. The NCUA for 30 years has had a policy of reviewing one third of its regulations each year, so that all of its regulations are reviewed over three years. My belief is, this is a reasonable policy. Going faster would require more employees–an expense–or being more hasty, which results in some regulations not receiving the reasoned examination that they should. I believe NCUA should hold firm to this policy of reviewing one-third of its regulations each year. It is a large but manageable portion. And we publicize what we are going to review. The present process allows us to take a hard look at current regulations, giving us time to suggest some be made more flexible–and others be strengthened–based on public comment and what we perceive to be future conditions. The present process allows us to proceed in an orderly progression. Of course, we are open to any suggestions and we will try to become even more proactive in publicizing what regulations will be considered in any year, the time of year they will be reviewed, and how persons can comment on regulations under review.
I believe, however, that we cannot write a report about every regulation we review. Doing so would be too burdensome and not particularly fruitful. But at the same time, the NCUA is pleased to review any regulation–not just ones slated for review–that enough credit unions call to our attention as having out-lived its usefulness. And we welcome suggestions compatible with safety and soundness.
There has been talk in some circles of not creating a new regulation without at the same time eliminating another. This one-for-one mathematical formula sounds pleasing at first, but it uses a butcher’s knife when it is really scalpels that are called for. Each regulation was created for a purpose.
Another part of President Obama’s orders calls for access by the public to the regulation process. Again, we have already met or exceeded the president’s directives. Credit unions and the public have always had full access to comment on regulations proposed by the NCUA. All of these comments are read by the NCUA, and we make changes in proposed regulations based on those comments.
The Obama initiative is trying to have other agencies catch up with NCUA. We have been well ahead of the curve. This does not mean, however, that we cannot do better. As I said, we are open to all ideas and we expect the best ones to rise to the top. But you can be certain we will take into account all comments and not finalize any regulation before we are sure it is not overly burdensome and that it will do the job intended.
The NCUA is charged with certain responsibilities we take seriously and those should be our focus. The NCUA is not charged with making the credit union system the largest financial services system in the nation, or the most efficient, or the most loved, or the most technically advanced. The NCUA is charged with keeping the system safe, in keeping the deposits safe, and the share insurance fund safe. If diversification will aid safety, then we can draw up regulations about diversification.
Regulation is often thought of as a negative. But we could just as easily think of it as a positive. Good regulation allows for innovation and growth. Good regulation keeps people safe, but it does not hold them back. That is exactly what the NCUA wants to accomplish.
Safety to deposits and the system. A healthy skepticism to any regulations that may have run their course. An open door to all comments and ideas.
The greatest good for the greatest number. And a keen eye to the future as we see it unfolding rather than clinging to past formulas. These need to be the NCUA’s guides going forward.
Michael E. Fryzel