OLYMPIA, Wash. — While CUNA generally leaves state regulatory issues for the leagues to battle out, "fundamental issues" raised in Washington State's consideration of private primary deposit insurance have drawn the national trade association into the fray.
CUNA, which does not typically weigh in on state matters, has written the Washington State Department of Financial Institutions Credit Union Director Linda Jekel in support of considering the option of private primary deposit insurance in Washington State.
CUNA President/CEO Dan Mica noted that banker groups often write in opposition to changes to credit union authorities; several including the American Bankers Association have written on this particular proposal. "However, we are dismayed that some within the credit union system have failed to recognize what is really at stake in this rulemaking process–the viability of the dual chartering system and the ability of state regulators to affect independent, tailored decisions developed under a rigorous comment and review process," he wrote.
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To the contrary, NAFCU President/CEO Fred Becker said that private insurance was a threat to the dual chartering system, a system that he said NAFCU "fully supports." Becker wrote, "Currently, state-chartered credit unions whose shares are insured by the NCUSIF are subject to rigorous safety and soundness regulations promulgated and administered by the NCUA, but still enjoy charter options available to them under stateregimes…NAFCU opposes significant alterations to the current dual chartering and supervisory system. An option to maintain primary share insurance with a private insurer is a significant alteration and one that threatens
this system."
CUNA even commended the NCUA Board's approach in its comment letter of offering what they saw as improvements rather than simply opposing the option.
CUNA's letter stated that opponents' arguments against private insurance "focus on speculative future risks" while ignoring state statutory restrictions, including adequate reserve requirements. "In view of the limitations in the state law, we question whether such open charges are really masking an underlying distrust of state regulation, further undermining the dual chartering system," Mica wrote.
He added, "While there are costs and benefits associated with either federal or private insurance alternatives, CUNA has long held the position that credit unions should be able to make the choice for themselves. In order for credit unions to have a real choice, it is imperative that federal and state regulators be empowered to enhance the charters they supervise, consistent with legal constraints and safety and soundness requirements. Further, as a direct result of the fact that credit unions have this capability to choose between regulatory schemas, an essential check on the use of discretionary enforcement authority of both federal as well as individual state regulators remains in tact today–benefiting the entire credit union system."
Mica called the state's regulatory review process on the matter "robust and comprehensive." State law has many restrictions, he noted, and requires an ongoing review of the private insurance system by the regulator. "Your decision to proceed with a rulemaking process is consistent with the intent of the Legislature to provide for a choice in share insurance under a well-crafted regulation," he wrote.
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