NCUA's Hyland Optimistic About Future of Credit Unions

Going to all five of our regions and talking to examiners and supervisory personnel has given me a keen insight into what's going on in the agency and gives me a sense about what as a national policymaker I should be focusing on. Also, I love technology, so introducing the use of Webinars as a way to get information to our constituencies has been fun and the strong response shows that it is effective.

CU Times: Much of the regulatory relief that credit unions are seeking can only be granted by Congress. Is there anything more the NCUA can do to help credit unions thrive during difficult times?

Hyland: Credit unions have adhered to three strong principles: know the collateral, know the consumers and know the capacity to repay. That has served them well. Times like these offer credit unions the tremendous opportunity to meet the needs of their members, and we've been doing things such as reminding them of the availability of the central liquidity facility and explaining all the facets of share insurance. We need to be continually mindful of the economic climate as we look at our rules so we balance safety and soundness with flexibility.

CU Times: Any rules stand out as needing to be changed?

Hyland: I am always open to suggestions, but my response is to review things on a case-by-case basis.

CU Times: How about helping credit unions expand their capital?

Hyland: Credit unions are generally well-capitalized. They had an average of 11.1% as of June 30. Credit unions need to use the capital they have and think about what they would do with more money and how that can help them meet the needs of their members. Some of the issues have to be dealt with by Congress, such as making prompt corrective action more comparable and risk-based. And credit unions and Congress would need to think about what secondary capital would look like.

CU Times: During NCUA Chairman Michael Fryzel's confirmation hearing, Senate Banking Committee Chairman Christopher Dodd, who is usually supportive of credit unions, said he was a little concerned about mission creep, that credit unions were becoming too much like banks. Do you think this is a problem?

Hyland: I haven't talked to Senator Dodd so I would have to know more about what he is referring to. But the agency and credit unions face a constant challenge from Capitol Hill to show how credit unions are different so they can keep their tax-exempt status.

The outreach task force that I chaired came up with a set of ideas to do this. I was pleased that the board implemented the recommendations on data collection. This will provide data to track the services that credit unions provide and provide information about who the particular credit union is chartered to serve. These are what make credit unions unique and without them there would be more homogenization of financial services and that would be bad for consumers.

The idea of mission creep needs to be defined in light of how credit unions have transformed themselves to meet the needs of their members. Times have changed and credit unions have changed. But I want credit unions to understand the risks and manage those, and if they do that, they will have the chance to be responsive by offering more services.

CU Times: You watched NCUA closely while on the outside, what's it like being inside the belly of the beast, as it were?

Hyland: For 14 years as an attorney I challenged NCUA on its enforcement of some matters. Now, to be sitting on the NCUA Board is ironic. I have always believed that it is critical that NCUA maintain its position as a strong regulator but show compassion for and understanding of those we are regulating.

CU Times: Has anything surprised you?

Hyland: The dedication and commitment of NCUA staff and examiners to the credit union system. They want credit unions to serve their members in a manner that's safe and sound. There is a natural give and take between the institutions that want to move forward and examiners who want them to move forward but manage their risk appropriately. Before I joined the board, I sometimes felt that the agency mandated that we manage risks so tightly that credit unions were prevented from innovating.

CU Times: Talk a bit about what it's like being a board member. Are there more spirited discussions between board members than we see in public meetings?

Hyland: The Sunshine Act limits the dialogue between board members. A majority of the board–in our case two members–can't discuss board matters privately. So we often communicate through our staffs. It's sort of an odd way of doing business. Our senior policy advisers keep the lines of communication flowing.

CU Times: Are the dynamics between board members different during executive sessions?

Hyland: The discussions take the same form as in public meetings.

CU Times: What are your thoughts about the future of credit unions? Are you optimistic?

Hyland: Yes. Credit unions in the long term have to answer the questions of: Who should we be? How do we respond to the changing climate? What should we do and what will we look like? We will address these questions at the forum next June celebrating the 75th anniversary of the Federal Credit Union Act. We will deal with issues such as capital, and field of membership and others because we are still developing the agenda. But it's not a rose-colored glasses view.

CU Times: What are some potential problems for credit unions?

Hyland: Due diligence. It's great to offer new products but you have to use common sense. When consumers buy a refrigerator or a car they often do lots of research and consult Consumer Reports.

CU Times: I heard you say the other day at the World Credit Union Day reception that you had vowed never to become a credit union lawyer like your father was. What changed your mind?

Hyland: I graduated from college with a degree in comparative literature, but I realized I couldn't do much with that. So I went to law school and fell in love with the law, and I wanted to do international law. But when I graduated from law school, it was the 1991 recession and no one in Washington was hiring international lawyers. So I joined my family's law firm to help out for a bit, and the firm had a lot of clients that were credit unions. Then I went to CUNA and then to Albany and the rest is history.

CU Times: You are the only Democrat on the board. Does partisanship play much of a role in how the board operates?

Hyland: It's a partisan process to get on the board, but once you are on the board, the goal is to help credit unions and ensure safety and soundness. Partisanship doesn't play a role.

CU Times: Because of the law, you are the only board member with experience in the credit union movement. Do you like that law or would you like it changed?

Hyland: It is helpful to have had the experience with credit unions. Whether there should be more than one board member with a credit union background is something Congress will have to decide.

–cmarx@cutimes.com