Let the Politics Begin, New Version of CURIA Introduced

WASHINGTON-What is being billed as the new and improved Credit Union Regulatory Improvements Act (H.R. 2317) by co-sponsors and the credit union industry was introduced earlier this month. On May 12, House Financial Services Committee Members Ed Royce (R-Calif.) and Paul Kanjorski (D-Pa.)-along with 16 other co-sponsors-revealed the second iteration of CURIA. Within less than a week, four more had signed on for a total of 22. Though the bill’s co-sponsors leaned Democratic last time it was introduced, so far CURIA’s split is 13 to 9 favoring the Republican majority. CURIA contains two key changes from last Congress’ legislation. First, it includes language from the Net Worth Amendment for Credit Unions Act (H.R. 1042) to broaden the definition of net worth under the Federal Credit Union Act for Prompt Corrective Action purposes. This provision relates to the expected changes the Financial Accounting Standard Board plans to make in 2007 from the pooling to the purchase method of accounting. In a teleconference hosted by CUNA last week (see related story page 6), NCUA Director of Examination and Insurance Dave Marquis described the FASB proposal without the change to the definition makes it virtually impossible for two healthy credit unions to merge. He would like to see “acquired equity” incorporated into the definition, as CURIA does, instead of just “retained earnings” as it stands now. Additionally, the newer version of CURIA provides a more detailed account of how a risk-based capital system would work for credit unions. NCUA Chairman JoAnn Johnson authored the proposal that was ultimately included in the bill. “I am pleased that NCUA’s proposal for risk-based capital and reform for prompt corrective action, which is designed to strengthen safety and soundness, is an integral component in this legislation,” Johnson said upon the bill’s introduction. “A risk-based capital structure is the most comprehensive approach to improving the system for credit unions and is consistent with the standards established for FDIC-insured institutions. “Furthermore, CURIA would facilitate greater access to affordable financial services in many underserved communities across the country. The bill would enhance credit union regulation as it relates to facilitating access to capital and credit for small businesses.” The bill’s main sponsors agreed. In introducing the bill, Royce said, “CURIA’s improved safety-and-soundness provisions are of the utmost importance to me. Based on the recent recommendations of the federal credit union regulator, these enhanced risk-based standards will ensure the efficient allocation of capital, while protecting taxpayers.” “Credit unions today are among the most highly regulated and restricted of all depository institutions. The new CURIA will ease these regulatory burdens responsibly and help credit unions to succeed in the 21st Century,” Kanjorski added. He noted how credit unions could help fill a small business lending vacuum. “[S]mall businesses are the backbone of our economy and they need loans to survive and grow,” the lawmaker explained. “However, loans to small businesses have materially decreased, according to new studies by the Small Business Administration and the Atlanta Federal Reserve Bank. In order to allow small businesses to continue to create more jobs and spur economic growth, the new CURIA will help credit unions to fill this void.” In addition to the PCA and “FASB fix” provisions, the bill would expand credit union member business lending by increasing the cap to 20% of assets, raising the minimum loan considered “business” from $50,000 to $100,000, and exempts loans to non-profit religious organizations from the cap. It also provides a number of regulatory relief measures from credit union governance to investment authorities. CUNA President and CEO Dan Mica thanked Royce and the other original co-sponsors for their support. “Your actions clearly demonstrate your commitment to the future of credit unions and their ability to operate more effectively and efficiently to serve their members,” he wrote in a letter Royce. NAFCU President and CEO Fred Becker said, “The Credit Union Regulatory Improvements Act of 2005 (H.R. 2317) will modernize credit union net worth standards, provide credit unions with substantial relief from regulatory burdens and help credit unions promote economic growth in their communities. BMI Federal Credit Union (Columbus, Ohio) CEO Sharon Custer also expressed her gratitude in a release from the legislators, stating, “As a not-for-profit cooperative, our credit union exists to serve our members. We must be able to offer the quality services our members want, or they will go elsewhere for them. I am very supportive of CURIA because it will give my credit union the flexibility it needs to grow, keep pace with our members’ needs, and attract the next generation of our membership.” NASCUS was not prepared to comment until its Government Relations Committee met at a later date. Last Congress, the bill ended up with a bipartisan group of 69 co-sponsors, but Royce has said he hopes for many more in the 109th Congress. As previously noted, 22 have already signed on including three who did not co-sponsor the legislation last Congress, CUNA Senior Vice President for Governmental Affairs John McKechnie pointed out. He is also looking to add back the 64 returning members of Congress to the legislation to start with. “At this point our biggest immediate challenge is to build co-sponsorship,” CUNA Vice President of Legislative Affairs and Senior Legislative Counsel Gary Kohn remarked. “We’re going to build off of last year’s bill. There were 69 co-sponsors last time around; 64 of those members have returned to the 109th Congress, so they’ll be the obvious immediate targets but we have an initial goal to build that sponsorship up to about 100 members. We would hope that this will lead to another hearing in the Financial Services Committee and then, from there, obviously the push towards passage as a complete package or certainly as parts of other bills.” Predictably, the American Bankers Association came out swinging against the bill when it was introduced. Newly-installed ABA President and CEO Edward Yingling asked, “The CURIA bill, which appears to be a wish list for the big credit unions, begs a fundamental question: Should credit unions that offer the same services as banks-and even make multi-million-dollar loans to finance hotels and shopping centers-be allowed to retain their special tax and regulatory treatment?” He called the bill “fuel” for the growth of larger credit unions “disguised as `relief.’” Yingling pointed out that last year the banks generated 70,000 letters of protest and vowed to follow up again this year. [email protected]