Matz, Cordray take CU questions on CECL, exams, exemptions

February 10, 2016

ALEXANDRIA, Va. (2/10/16)--National Credit Union Administration (NCUA) Chair Debbie Matz and Consumer Financial Protection Bureau (CFPB) Director Richard Cordray were joined Tuesday by their agencies' staff to answer credit union questions in a 90-minute webinar.

This is the fifth year the two agency leaders have come together to answer credit union questions via webinar.

Larry Fazio, director of the NCUA's Office of Examination and Insurance, addressed the Financial Accounting Standards Board's current expected credit loss (CECL) proposal.

Fazio said the proposal would not affect the risk-based capital ratio that will become effective in January 2019, but will likely have a depressive effect on credit unions' net worth ratio.

"By and large the credit union system is well-capitalized, so the one-time impact on the net worth  ratio shouldn't be that material, and we'll certainly explain to examiners if and when that change happens, how to take it into account," Fazio said.

The Credit Union National Association (CUNA) wrote to Matz last week asking her to assure credit unions that the agency will strive to minimize the CECL burden.

Matz addressed the idea of an extended examination cycle, a topic CUNA addressed in a meeting with the agency last week. Matz said it would take at least one supervision cycle with the agency's recent regulatory relief changes in place before the cycle is extended for anyone.

She also added that the NCUA is working to update its infrastructure to allow examiners to examine credit union data remotely.

"Until we have that in place, which I don't see as being too far off, but until that's in place it would probably be irresponsible for us to at the same time examine less frequently," she said. "We are looking at when and how we can extend the exam cycle, but we're not there yet."

Cordray praised credit unions for "making consumer protection a priority long before this agency was conceived, in fact, long before any of us were born." He said credit unions and the CFPB  share the same mission and can hopefully complement each other in service to consumers.

"I will say it again: credit unions did not cause the recent financial crisis. You did not underwrite the bad loans that brought down the housing market, when others were doing so, you did not," he said. "Instead, you upheld sound underwriting standards even though it caused you to lose customers and market share to irresponsible players who did not adhere to the rules. And you sounded the alarm well before growing irregularities in the mortgage market cause the credit crunch that crashed the economy."

However, Cordray added, "We aren't at liberty to simply exempt credit unions entirely from consumer protection laws and rules. I believe Congress has precluded us from doing that. But where we can arrange for rules to create tiers so smaller institutions can be treated differently in light of different compliance burdens and the level of risk they pose, we have done so and will continue to do so."