NCUA Chairman Debbie Matz said the regulator will ask Congress for authority over third-party vendors who could threaten credit unions’ safety and soundness.
The remarks were published in the NCUA’s September newsletter, in Matz’s monthly Chairman’s Corner column.
“Let’s not forget that just days after Lehman’s demise, AIG teetered on collapse. The source of AIG’s failure was a small division operating outside of the firm’s traditional operations and just beyond the reach of regulators. Dangers to the broader credit union system could be lurking in such regulatory blind spots,” she wrote.
In early 2012, the NCUA proposed a rule that would require CUSOs to submit financial reports directly to the NCUA. The board was scheduled to finalize that rule at its June 2012 board meeting, but canceled that meeting and announced it would delay the final rule.
Board Member Michael Fryzel, a former attorney, told Credit Union Times in July he initially questioned whether the NCUA had the legal oversight authority to require CUSO financial reporting, because such authorities are not in the Credit Union Act.
Fryzel said he now agrees with legal opinions that say the NCUA does have the authority, and he’s over that hurdle.
However, Fryzel said he’s also opposed to the cost of CUSO oversight, saying it would cost more than $1 million to set up and more than $500,000 to maintain each year.
Cut costs, Fryzel said he told NCUA staffers, and this rule moves. However, he said he has not received a leaner budget. Fryzel wouldn’t say if he thinks the rule would be finalized this year.
NCUA officials weren’t immediately prepared to discuss the vendor legislative effort, but said more information is forthcoming.