Credit unions already received one gift to start the new year: NCUA announced there’ll be no corporate assessment this year. CUNA called for this last summer, when it became clear that an improving economy and housing market made an assessment less likely.
And it looks likely that there’ll be no more in the future—barring any major setbacks, as NCUA has said. And a federal insurance fund premium in 2014 is also unlikely given the credit union system’s current financial performance.
Credit unions also could see rebates of assessments they’ve already paid (although NCUA says 2021 at the earliest).
These developments are significant and good news for credit unions, which have been laboring under these assessments since 2009 and wondering if they might ever see any of their money come back to them.
And our sights are set on generating more good news for credit unions this year—particularly in reducing the regulatory burden on credit unions.
In November, I sent a letter to the NCUA Board, outlining items that would help credit unions realize real regulatory relief.
Among my key points:
The agency should establish, with the support of other federal financial regulators, a regulatory relief working group designed to examine the burden of excessive regulation on financial institutions. This includes regulations the Consumer Financial Protection Bureau (CFPB) issues.
It’s unclear that any additional risk-based net worth requirements are necessary for credit unions, as most are doing well financially. Rather than pursue a one-dimensional effort by changing regulations to impose even more net worth requirements, I urged NCUA to work with us to support statutory capital reform—including supplemental capital—which could appropriately address risk management but in the context of a system that also accommodates well-managed growth.
Establishing an NCUA working group to focus on exams and appeals would be valuable to the agency and credit unions. The group would look at the entire exam process and recommend improvements, including communications to and from examiners and the appeals process under which credit unions could pursue disagreements with examiners.
The agency has supported CUNA and credit unions on issues related to Financial Accounting Standards Board (FASB) proposals, including those on recognition and reporting of credit impairment in financial instruments and the definition of a “public business entity.” I noted the agency’s views on these issues are critical to credit unions and to FASB, which must weigh carefully the views of a regulator.
NCUA should consider an expedited waiver process for certain member business loans and loan participation requirements, particularly for well-managed credit unions with considerable experience with the products that are the subject of a waiver request.
The agency should approve its derivatives proposal as soon as possible. It’s designed to help credit unions manage their interest-rate risk.
And finally, NCUA should consider more carefully its “stress testing” proposal for very large credit unions before the agency approves it. The proposal needs more analysis and justification, including the costs involved.
If credit unions can emerge from 2014 with most, if not all, of the regulatory relief items we have outlined for NCUA, credit unions will be stronger still in their ability to serve their members.
That’s what CUNA will be pressing NCUA nonstop to achieve throughout this new year.
The discussion boards on CUNA’s Compliance Community featured an interesting discussion last week: what is the difference between the terms “share draft” and “checking account”? The correct use is important since credit unions pay dividends, not interest.