Divided NCUA Board Approves Budget, Risk-Based Capital Delay

Comments by Harper and Republican J. Mark McWatters indicated that Harper and NCUA Chairman Rodney Hood had locked horns over Harper's plan to add three staff members to the agency for consumer protection as part of the budget.

Harper said he was disappointed that two weeks of negotiations with Hood over Harper's plan to add consumer protection staff to the agency. Harper, who had proposed adding three staff members said the negotiations centered over adding two staff members.

McWatters said he agreed that the agency needs a greater focus on consumer protection but said the impasse between Hood and Harper would doom the budget if he, too voted against it. He said he considered it more important to approve the budget and continue pushing on the consumer protection issue.

Hood did not directly address negotiations with Harper.

In presenting the 2020 budget, agency CFO Rendell Jones said the final plan reduced the 2020 budget by $330,000, with the savings coming from the agency's annual contribution to the Federal Financial Institutions Examinations Council.

He said the agency also will have about $2 million left over from 2019 and that the money will be used to offset 2020 expenses.

Hood said he opposed Harper's consumer protection plan.

"I am not convinced that the credit union system needs a dedicated consumer protection staff," he said.

Harper said he is "deeply disappointed" with that decision, adding that today's credit unions are more complex and need a greater emphasis on consumer protection.

Questioned by Harper, Matthew Biliouris, the agency's consumer protection director, said he had requested an additional staff member for his office, but that request was rejected.

McWatters indicated that he would support Harper's proposal, if it did not result in the budget being rejected.

"I have advocated for the allocation of additional resources to the agency's consumer protection staff," he said. "In doing that, I fully appreciate the differences between credit unions and banks and that our regulatory protocols should reflect those material distinctions."

He added that he will continue to search "a collegial and collaborative path" to achieving that goal.

The board also approved an additional two-year delay of its Risk-Based Capital Rule, with Harper opposing it.

Larry Fazio, the director of the agency's Office of Examination and Insurance, said that the credit union industry can afford to delay the rule until 2022.

Agency staff said the delay will allow the rule to be addressed in a "holistic" manner.

"I believe there is little reason to move fast simply for the sake of moving faster," Hood said. "The current capitalization of the credit union industry provides is time for us to adopt the right capital framework."

But Harper said the rule is needed, adding that the agency should have learned lessons from the financial crisis.

"Those who forget the past are often doomed to repeat it," he said.

McWatters said that he has opposed the rule since it was first proposed, adding that he does not believe that the board has the authority under federal law to adopt it.

He said that the delay would allow the agency to better coordinate it with other upcoming rules.

He said he has been assured that the board will be considering a rule on subordinated debt at its January meeting. Hood previously promised that rule by the end of this year.

McWatters also said that he has been told that the board will be considering a rule similar to the community bank leverage ratio rule.