Move Fast on Reg Overhaul, Trades, Attorneys Tell NCUA
The NCUA should move as quickly as possible to adopt many of the task force recommendations to loosen the regulatory burden of financial institutions, trade groups and credit union attorneys said Thursday.
And some could be implemented faster than others, the attorneys and lobbyists said, noting that some of the recommendations already are in the regulatory pipeline.
"Regulatory relief isn't a one-stop shop – there are a number of issues we are focusing on for the industry. NCUA's report is a step in the right direction," said Carrie Hunt, NAFCU’s executive vice president of government affairs and general counsel. "Already, a number of the items cited have been proposed, and we hope many of those included come to fruition. Additional field of membership changes and capital changes would certainly be welcome as well."
The recommendations are the product of a regulatory task force formed earlier this year, following executive orders issued by President Trump.
The agency has stressed that as an independent financial regulator, the NCUA s not subject to executive orders, but has attempted to comply with the spirit of the order.
The NCUA will accept comments on the task force report for 90 days after its publication in the Federal Register and changes to any regulations will have to go through the regular regulatory process.
One credit union attorney said that while the proposal is a welcome development, the NCUA should move more quickly.
“You wonder how much of a sense of urgency there is,” said Andrew Keeney, c-chair of the credit union practice at Kaufman & Canoles.
“Ninety days?” he asked. “Why not 30 days?”
Kenney said that the agency has said that its goal is to implement any proposed rule changes over the next four years. He said the NCUA should move more quickly than that and has the regulatory power to do so.
Attorney Kathy Delaney Winger said that some of the proposals could be considered “low-hanging fruit.” For instance, she said that proposals to reorganize rules so that similar rules are joined together should not be too difficult to accomplish.
On the other hand, she said she has seen proposals to enhance federal preemption in rules her entire career, adding that such a controversial plan would be difficult to accomplish.
The trade groups also said that some of the proposals have been circulating for some time.
"CUNA is thankful that NCUA put a lot of thought into an extensive list of possible regulatory reform items that could reduce the regulatory burden for credit unions,” said Elizabeth Eurgubian, CUNA's deputy chief advocacy officer. “CUNA has suggested many of these reforms to the agency through extensive outreach through in person meetings and regulatory review letters."
While trade groups and attorneys said they are still reviewing the task force report, some of the possible rule changes caught their eye.
NASCUS President Lucy Ito said a proposal on alternative capital federally insured credit unions could use in meeting capital standards would be a welcome change.
“NASCUS' long-held view is that a capital structure limited exclusively to retained earnings significantly disadvantages credit unions in facing unexpected economic shocks, and penalizes well-run institutions that are dealing with the ups and downs of the economy, such as simply attracting deposits too quickly from consumers in a “flight to safety” that credit unions offer,” she said. “From a safety and soundness point of view, this recommendation is common sense regulation.”
Proposals to increase stress testing beyond $10 billion and exempting high net worth credit unions from risk-based capital would be very helpful, said Paul Gentile, president of the Cooperative Credit Union Association.
“The agency recognizes some of the challenges in multi-state lending and the rules surrounding loan purchases,” Gentile said.
He said the agency also should consider not limiting the extended exam cycle to credit unions under $1 billion.
“There are very good cases of credit unions with more than a billion dollars in assets that should have an extended cycle,” Gentile said. “This would provide relief to those credit unions, but more importantly focus its resources on the credit unions that most need it."
One credit union attorney complimented the NCUA for its “awesome undertaking.”
“It’s an opening shot across the bow,” said Bruce Jolly, an attorney with Reed & Jolly. “Any breath of relief is a welcome one.”