Regulatory Watch

CUNA Aims to Ease CUs’ Reg Burden

CUs are overwhelmed, and CUNA wants regulators to know it.

December 1, 2011

CUNA continues to urge regulators to relieve credit unions’ regulatory burden. Credit unions simply are overwhelmed by the regulatory requirements under which they
operate—and CUNA wants regulators to know it.

Any new requirements that may emerge over the horizon, including those from NCUA, the Consumer Financial Protection Bureau, the Federal Reserve Board, and other agencies, will only add to the load credit unions already must shoulder.

Plus, it’s unclear that any regulator is looking beyond its own bailiwick to appreciate the collective requirements credit unions face.

As the chief safety and soundness regulator for federally insured credit unions, NCUA has increased credit unions’ regulatory burden during the past several months with new
proposals, such as those amending the agency’s credit union service organization (CUSO) rule and those requiring greater interest-rate risk oversight beyond what’s already required.

NCUA also has indicated it’s considering proposals in a few more areas, including member business lending, loan participations, investments, and concentration risks.

At the same time, however, the NCUA Board chairman has announced a Regulatory Relief Initiative, and the agency has embarked on measures to limit the impact of regulations, such as reconsidering the CUSO proposal and reviewing whether the agency’s definition of small credit unions (currently $10 million in assets) should be raised.

But based on credit unions’ comments, regulators must do much more to make a dent in the load of regulations credit unions carry.

That’s why—using input from credit unions, league staff, members of CUNA committees and subcommittees, CUNA Councils, and other leadership groups—CUNA is developing a list of rules and agency actions NCUA should address. These efforts could help the agency provide meaningful relief to credit unions without undermining the agency’s primary function of overseeing credit unions’ safety and soundness.

Such actions could include:

  • Improving the overall regulatory process by, for example, limiting new rules to address material safety and soundness problems;
  • Targeting rules addressing problem areas to those credit unions that engage in such activity, unless otherwise directed by Congress; and
  • Expanding the Regulatory Flexibility Program or embarking on more initiatives to help ease credit unions’ burden.

CUNA’s Examination and Supervision Subcommittee, chaired by Ohio League President/CEO Paul Mercer, has identified and raised with NCUA a number of concerns regarding examiners and the examination process that have only escalated with the onset of the current economic crisis.

Examiners should, for instance, make every effort to resolve disagreements with credit union officials before issuing a Document of Resolution (DOR) or Letter of Understanding and Agreement (LUA), and examiners shouldn’t rush to issue DORs and LUAs before first trying to work out issues with credit unions.

CUNA also is concerned about the most recent NCUA Office of Inspector General’s Material Loss Review Report on the use of DORs. It found the agency hasn’t been
adequately following through with credit unions on whether DORs were resolved.

The report shouldn’t be used as support for examiners to be more aggressive in issuing DORs or to avoid working with credit unions to resolve problem areas, such as allowing credit unions to develop their own solutions.

CUNA also recommends that NCUA act resolutely to relieve specific burdens that don’t require statutory changes. For example, CUNA urges NCUA to allow healthy credit
unions, at the very least, to manage their own risks by determining for themselves (under appropriate rationale and justification) how much net worth, if any, is needed beyond what the Federal Credit Union Act or the agency’s rules require.

Policymakers have begun to appreciate the concern that regulatory burdens present real impediments to growth and productivity.

Relieving credit unions’ regulatory burden is CUNA’s No. 1 regulatory advocacy objective. Send me an email describing which regulatory requirements trouble you the most.

MARY DUNN is CUNA’s senior vice president/deputy general counsel. Contact her at 202-508-6736.