The NCUA would maintain its authority over credit unions, butthere would be a new agency to regulate many of the financialproducts issued by credit unions, according to a regulatoryrestructuring plan released last Wednesday by the Obamaadministration.

While the NCUA would remain intact, some of its consumerprotection responsibilities would be shifted to a new ConsumerFinancial Protection Agency that would regulate mortgages, creditcards and other financial products. Currently, many consumerregulations are issued jointly by the NCUA, the Federal Reserve,the FDIC, the Office of the Comptroller of the Currency and theOffice of Thrift Supervision.

In a White House speech attended by lawmakers, regulators andlobbyists, President Obama said the changes were needed to avoid arecurrence of events and policies that “led us to nearcatastrophe.” Obama did not mention the NCUA in his remarks, andthe CU regulator is referred to in only two of the 85 pages in thedocument that spelled out the details of his plan.

The president said the proposal, which must be approved byCongress, seeks to “create a framework in which markets canfunction freely and fairly, without the fragility in which normalbusiness cycles suddenly bring the risk of financial collapse, wewant a system that works for businesses and consumers.”

Obama has said he hopes Congress completes action on the plan bythe end of the year.

Although the NCUA's oversight of credit unions would remainintact, the plan does not give the agency a seat on a council ofregulators designed to monitor systemic risk. The plan would createa Financial Services Oversight Council to “help fill gaps insupervision, facilitate coordination of policy and resolution ofdisputes and identify emerging risks in firms and marketactivities.” It would be chaired by the secretary of the Treasuryand made up of the heads of the “principal financialregulators.”

The NCUA chair is not listed as one of those regulators on thecommittee. However, several lobbyists for credit unions said theywould try to get the NCUA chair included when the issue isdiscussed in Congress.

But Rep. Paul Kanjorski (D-Pa.) a leading supporter of creditunions, said the omission reflects well on their performance andmight nit need to be changed.

“The administration's decision not to include a representativefrom the NCUA on the proposed Financial Services Oversight Councilshould be understood to reflect a determination that credit unionsdo not pose a risk to collapsing the entire financial system, theprevention of which is the primary function of the council.Nevertheless, this is an issue that I will continue to monitor,” hesaid in a statement.

The administration has proposed significant changes in how banksare regulated, including the elimination of the federal thriftcharter and the creation of a national bank supervisor to regulateall federally chartered banks and federal branches and agencies offoreign banks.

The plan would also give the Federal Reserve additionalregulatory power and give the FDIC resolution authority forunwinding large firms. It also imposes higher capital and liquidityrequirements. It would also give banks unlimited interstate bankingauthority over payment and settlement systems.

CUNA Executive Vice President and General Counsel Eric Richardsaid eliminating the federal thrift will make it harder for creditunions to convert to other entities because “Mutual savings banks,which offer more options without forcing the institution to get acommercial banking charter, would no longer be an option.”

NCUA Chairman Michael E. Fryzel, who was at the White House toattend Obama's speech, said in a statement that he was “pleasedwith two specific elements: the creation of a council that wouldenhance consumer protections and the maintenance of a separate andindependent NCUA. Both of these, in concert with other aspects ofreform under consideration, will serve to ultimately improve thesafe and sound operations of the U.S. financial system.”

CUNA Vice President of Legislative Affairs Ryan Donovan said theconsumer protection agency is an “interesting academic idea,” andhis association wants to see if it will redistribute the regulatoryburden on credit unions or add an additional layer to them.

The new agency would complement-not supplant-the consumerprotection efforts of states. The plan says the agency's ruleswould “serve as a floor and not a ceiling. The states should havethe ability to adopt and enforce stricter laws for institutions ofall types.”

That provision pleased NASCUS President/CEO Mary Martha Fortney,who also said her organization is “pleased that the plan keeps thedual chartering system and keeps a strong role of state regulatorsin overseeing credit unions and in consumer protection.”

NAFCU President/CEO Fred Becker said in an interview that he hadconcerns about the new agency because “credit unions are alreadythe most heavily regulated financial services provider and areconcerned about having another bureaucratic layer.”

He added that “until we see more of the details, it's hard toknow the true potential impact on federal credit unions, but wehave found administration officials very receptive to listening toour concerns and expect to build on that relationship.”

Both the American Bankers Association and the IndependentCommunity Bankers of America expressed strong opposition tocreating a new agency to regulate financial products.

“Community banks pride themselves on the safety and soundness ofthe loans they make, and it's unnecessary that their customers bepenalized for the poor practices of a few,” ICBA said in astatement.