WASHINGTON — Mark McWatters, nominee for the NCUA board,told a congressional committee on Thursday the possibleoverregulation of small credit unions and risk-based capitalrequirements are two of the greatest challenges facing creditunions that he wants to examine further.

Senate Banking Committee Chairman Tim Johnson asked McWatterswhat opportunities and challenges he sees for credit unions.

“I think the greatest opportunity for credit unions is tocontinue what they're doing now – 96 million Americans in creditunions – they're growing. Their loan base is growing and the like,”said McWatters during the Senate Banking Committee nominationhearing on Thursday.

“One opportunity is particularly for low-income credit unionsand to expand their mandate to those Americans who are under-bankedand unbanked. There's opportunity there. Those folks need financialservices and they need financial services at a reasonable rate,” headded.

McWatters, President Obama's choice to replace Board MemberMichael Fryzel, said the principal challenge is to look to thefuture and anticipate the next systemic shock to the financialsystem.

“If you roll the clock back six years, seven years, the talkabout overconcentration of mortgage backed securities on the booksof a financial institution, the too big to fails or the largecorporate credit unions was largely non-existent,” he said. “It wasthere. It was hiding in plain sight.”

However, McWatters said sounding the alarm on potential problemstoo far in advance is not always the best strategy.

“If you're always crying wolf, you'll be considered a flake soyou need to exercise judgment carefully and judiciously,” hesaid.

McWatters highlighted the overregulation of small credit unionsas an area of concern.

“NCUA has made some progress in this area – I think more workthough needs to be done. If I'm confirmed for this position, it'san area I want to look into,” he said. “I want to talk to creditunions. I want to talk to the NCUA. I want to reach an independentanalysis myself as to whether small credit unions are regulated ornot.”

The NCUA proposed risk-based capital requirements at theagency's January board meeting. McWatters said a risk-based systemmakes sense philosophically for credit unions.

“The devil is in the details,” said McWatters, who added that hewants to look further into the issue.

Sen. Elizabeth Warren, a member of the committee, expressed herfull support behind McWatters during the hearing.

“I worked closely with Mark on TARP oversight and he was alwayssmart, thoughtful and principled and I strongly support to thecredit union board,” she said.