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WASHINGTON-The regulatory relief legislation introduced by Congressman Jeb Hensarling (R-Texas) at the end of last month, aimed at providing regulator relief to the financial services sector, did not include a provision to modernize credit unions’ capital system. NCUA Chairman JoAnn Johnson’s risk-based capital proposal did not make the cut into H.R. 3505, the Financial Services Regulatory Relief Act, though widespread support has been demonstrated through co-sponsorship of the Credit Union Regulatory Improvements Act (H.R. 2317) (See related story on page 4). “The risk-based proposal is something that I think has a wide range of support on the Hill,” NAFCU Director of Legislative Affairs Brad Thaler remarked. “Whether there’s enough there to get it passed, it’s hard to say right now.” He pointed out that in the legislative scheme of things, the risk-based proposal is relatively new. “It certainly has elements of reg relief in it,” NCUA Director of Governmental and Congressional Affairs Cliff Northup said. He added that he hopes the agency has the opportunity to add the risk-based capital provision onto the bill. NCUA Board Member Debbie Matz has met with the staff of Senate Banking Committee Ranking Member Paul Sarbanes (D-Md.). Northup followed up with NCUA staff attorneys. “There were a lot of people who were looking at this bill and anticipating that it would include some of the provisions from CURIA, which obviously it does, but particularly net worth and the PCA modernization. We’re not surprised that it is not included in spite of what some people have predicted,” CUNA Vice President of Legislative Affairs and Senior Legislative Counsel Gary Kohn said. “The intent of this bill was-and continues to be-to provide a vehicle that is quote-unquote noncontroversial and therefore is likely to pass. And, therefore, they stuck with provisions that have a history within the House; they’ve been voted on before.” CUNA and NAFCU have both said they will continue to lobby for the provision in the reg relief legislation. “We continue to talk to both sides about the proposal,” Thaler commented. “I’d say the proposal’s not included because there’s not a broad enough consensus they’ve found yet on the proposal. I would not rule out that it may be something that could be added via the mark up process. The introduction of the bill is really just the first step of the process in the House and we continue to talk with people and meet with people about that.I’d say that a lot of the offices we’ve talked to have been very open to the proposal.there is some support for it on the Hill. Whether that translates into being included in the mark up process, things are going to have to play out but I’d say that’s on the table for some consideration.” Kohn said CUNA is also meeting with lawmakers on the risk-based capital issue. “We fully intend to pursue the option of trying to get PCA in particular in this bill,” he said, adding that CUNA “won’t give up on member business loans either,” though it may be more difficult to sell. “But certainly we have had meetings,” Kohn continued. “We’ll continue to have meetings in an effort to try to persuade members of the committee that PCA is an appropriate provision for this vehicle and is not a controversial provision. Whether we’ll succeed in that, it’s too soon to say but certainly that is going to be our goal with reg relief.” But the lobby groups will have to work fairly quickly as lawmakers spring into action this fall. “We expect the Financial Services Committee will work on the bill and try to move the bill in the fall after the August recess, probably at some point in September,” Thaler said. “They’re also looking at some point in September potentially holding a hearing on other regulatory relief matters that haven’t necessarily been covered in earlier hearings, including the CURIA legislation, possibly including the McHenry legislation (on mutual savings bank conversions) and possibly including the community banking Ryun bill (regulatory and tax relief for community banks; see related story).” The reg relief bill is essentially the same regarding the credit union provisions as previous versions that have passed the House with some “modest additions,” Kohn explained. H.R. 3505 includes the language from Congressman Spencer Bachus’ (R-Ala.) Net Worth Amendment for Credit Unions (H.R. 1042) and a provision to help the Federal Trade Commission in its oversight of privately insured credit union disclosures. There are also some provisions to help alleviate some of the burden of Bank Secrecy Act reporting, according to Thaler. He said lawmakers want to streamline the reporting process and clarify what needs to be reported to avoid over-reporting. For example, it would eliminate annual reporting of exempt persons, legitimate businesses that are known to deal a lot in cash, like pizza delivery, he explained, and leave that decision to the Treasury Department. New provisions of the bill also seek to improve coordination among the regulators concerning BSA. ABA on Board The American Bankers Association has been lukewarm to the bill in the past, partly because of the credit union relief provisions. However, ABA Executive Director for Congressional Relations and Public Policy Floyd Stoner commented, “This bill recognizes that Congress cannot keep piling new regulations on banks without sifting out old, outdated ones. The impact on community banks is particularly acute, as one out of every four dollars spent for bank operations goes to pay the costs of government regulations. The community bank is in danger of being regulated right out of business because of skyrocketing compliance costs and extraordinary manpower demands.” Atoner’s statement made no mention of the credit union section of the bill. [email protected]

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