The High Cost of Regulatory Burden

CUNA to GAO: ‘No compelling reason’ to change CU regulatory structure

April 28, 2023

CUNA has serious reservations about the conclusion of a Government Accountability Office study relating to the regulation of federal depository institutions, it wrote to the GAO. The study, “High-Risk Series Efforts Made to Achieve Progress Need to Be Maintained and Expanded to Fully Address All Areas” (GAO-23-106203), contains several troublesome recommendations.

Page 68 of the report recommends Congress “consider whether additional changes to the financial regulatory structure are needed to reduce or better manage fragmentation and overlap,” in the oversight of financial institutions.

“Should they be enacted into law, the recommendations put forth in this report regarding the consolidation of federal financial regulatory bodies would result in the elimination of the independent National Credit Union Administration, as well as the National Credit Union Share Insurance Fund,” the letter reads. “This would be devastating to credit unions as it would almost certainly diminish the viability of the credit union charter.”

CUNA—as representative for the entities that fund NCUA—does not believe NCUA should be eliminated and its functions consolidated into a larger federal banking regulator.

“Maintaining a separate, independent federal credit union regulator and insurer is critically important to the credit union system, and the structural and mission-driven differences between credit unions and banks necessitate such a regulatory scheme: credit unions' not-for-profit structure and their mission to promote thrift and provide access to credit for provident purposes are fundamentally different than other financial services providers,” the letter reads. “Further, credit unions – not taxpayers – are called on to provide NCUA additional funds if the agency or the share insurance fund require additional funding.”

“There is no compelling reason to change that arrangement,” it adds.

CUNA notes that NCUA—and state financial regulators—provide “thorough oversight, examination, and supervision” of America’s credit unions, and NCUA is NCUA is unique because it is the only financial regulator that is both an insurer and primary functional regulator.

“To reflect this dual function, its overall funding is derived from both a transfer from the share insurance fund and operating fees charged to credit unions,” the letter reads. “NCUA is funded by credit unions and their members, not by taxpayers. Credit unions and their members remain willing to pay for their own regulator provided there is sufficient transparency with respect to the agency’s budget and the overhead transfer rate.

“Under its current leadership, NCUA has made great progress in bringing about greater budget and operational transparency,” it adds.