WASHINGTON — NCUA Vice Chairman Rodney Hood has been on the board since 2005 and before that had an extensive career in the banking industry and working on rural credit issues at the U.S. Department of Agriculture. He recently discussed key issues facing the industry and his own plans once his term on the board expires in April.
Credit Union Times: What do you see as the high points of your tenure?
Rodney Hood: Since I've come on board, I've seen credit unions continue to grow in terms of market share. They have differentiated themselves from other providers, not just for the sake of differentiation but are doing it soundly.
CU Times: What do you see as the biggest regulatory changes we will see from the new administration-both on a macro-level and as they affect your board?
Hood: It's hard to say what's going to happen with the financial regulation of credit unions. My posture has been that credit unions were not at all a part of a lot of the market turbulence we've been experiencing, so I'd like to think that whatever happens going forward, credit unions will be allowed to be part of the solutions.
CU Times: What do you think of items on credit unions' agenda like raising or eliminating the business loan cap?
Hood: The average member business loan is $240,000; that is a loan that many other financial services providers are not making. Because of that loan size, credit unions can make a mark and help budding entrepreneurs build valuable, sustainable businesses.
CU Times: What about capital reform?
Hood: I'd like to see us do more to get a risk-based capital system. It's important given that I've emphasized risk management and risk mitigation, that credit unions should be able to marshal their assets against the riskiest elements of their balance sheets. In today's environment, the final payment of a fixed-rate, 30-year mortgage has the same risk rating as a first-year auto loan.
CU Times: The law allows there to be only one NCUA Board member with credit union experience and your background was in banking. What has that been like for you in terms of understanding credit unions? Should the rule be changed?
Hood: Although my background wasn't in credit unions, I brought 20 years of experience in financial services, including work with Bank of America, Wells Fargo and GE Capital, so I knew many of the issues credit unions were facing. We should change the rule so we can have good, competent candidates who can hit the ground running from day one, regardless of their experience with credit unions. I have mentioned this to Senate Banking Committee members who have asked about this.
Also, when we are looking at the restructuring of regulations and the NCUA, we should look at the size. While a three-member board is nimble, it prevents us from collaborating on activities because when you have three members, because of the sunshine laws you can't have two members meeting together.
CU Times: Are the NCUA and other regulators striking the right balance between ensuring safety and soundness and allowing credit unions to do their job?
Hood: Regulators should create an environment where credit unions can operate safely and soundly and be sure they have the confidence of their members. Some regulations can be excessive and especially taxing to our smaller credit unions. They don't have the breadth and depth of employees to delegate the compliance tasks for dealing with a regulation. So I always ask myself when considering a regulation what will the impact be on small credit unions.
CU Times: What about the regulatory structure?
Hood: Putting credit unions under the same regulator as other financial institutions would be a major disservice to credit unions given their unique tax-exempt, democratically controlled, cooperative structure. If credit unions were placed under the same regulator as others they would lose much of what makes them unique.
CU Times: This is a lousy time for all financial institutions. Are there things the NCUA can do to make it easier for credit unions to survive?
Hood: This is a great time for credit unions to demonstrate the people helping people philosophy. They are making mortgages, business loans and auto loans, so they are not contributing to the credit crunch. The main thing my agency can do is preserve confidence, and we are doing that by reminding people that deposits are insured up to $250,000 and backed by the full faith and credit.
CU Times: What about corporate credit unions? What will happen down the pike in terms of regulation? Also will there be additional consolidation?
Hood: I can't speak to what they will look like in the future, but I can say I value the work that they do in providing natural person credit unions with the payment systems they need, liquidity and investment services. I think the number of corporates we will eventually have will be market driven.
CU Times: What surprised you the most, in a good and bad way?
Hood: How much people love their credit unions. No one ever speaks of other financial services providers in that way.
Negatively, that credit unions focus so much on asset size. When I ask executives about their credit union one of the first things they want to tell me is asset size, as if that should be the telltale sign. I'd rather hear about other things, like field of membership, their outreach efforts and the products they offer as alternatives to payday loans.
CU Times: What are you going to do when your term on the NCUA Board expires in April?
Hood: Something in the financial services arena.
I am looking forward to finishing a book I've been working on about Opera-Voices Unheard-about African-American opera singers.
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