McWatters discusses transparency, MBL, reg burden in league video interview

December 15, 2014

NEWTON, Mass. (12/16/14)--As a National Credit Union Administration board member, J. Mark McWatters said it's his job to take the agency's perspective alongside the industry stakeholder perspective to come up with needed solutions.

Speaking to the Massachusetts, Rhode Island and New Hampshire Credit Union Leagues, McWatters shared his thoughts on agency transparency, member business lending (MBL), credit union regulations and more.

During a video interview with league President/CEO Paul Gentile, McWatters emphasized that in the approximately 3,500 pages of analysis into the cause of the crisis reported to Congress, credit unions weren't mentioned at all.

"It's a mistake to regulate credit unions as if they're too big to fail. First, they're not too big to fail and second, they didn't cause the financial crisis," said McWatters, who served on the Troubled Assets Relief Program's oversight panel.

When it comes to the agency's 2015 budget, McWatters said he hopes future budgets will be more transparent, and greater efforts are made to cut costs.

"My view is that we are spending other people's money for something that's very important--safety and soundness," he said. "But, if I'm spending your money and your members' money, then I think I should tell them how I'm spending it and maybe even why I'm spending it."

McWatters added that nearly three-fourths of NCUA's budget is for examiners and 11% of budget is for travel, so he is hoping the agency will look at creative ways to limit those expenses, cutting them back or at least stopping the rate of growth. He suggested more input from the credit union community could help bring new ideas to light.

"It's difficult to invent those ideas from within the NCUA itself without reaching out to the community that has expertise on the other side of the examination cycle," he said.

NCUA Chair Debbie Matz said at the board's November meeting that various nondiscretionary costs ensure that cutting the budget is "not an option" without "substantially" cutting staff.

Limits on MBL have been a point of interest for credit unions for a number of years, and while legislation would be required to change the cap, McWatters said there are ways the NCUA can make such lending easier for credit unions.

"These are small business loans, most of these MBL loans, and they're job creators, exactly what the country needs right now. We have an industry whose expertise is dealing with small business," he said. "This isn't something they have to do to tick a box, this is something they want to do, something they know how to, something they built an entire industry around. Why are we holding it back?"

CUNA, which continues to pursue legislation that would raise the MBL cap, has met with the NCUA to examine nonstatutory changes that could help credit unions lend more to member businesses.

Speaking on reports that the NCUA will likely remove interest-rate risk from its current risk-based capital proposal and issue a separate proposed rule sometime in 2015, McWatters says he believes in soliciting feedback as early as possible, preferably through an advance notice of rulemaking. This would allow the agency to receive industry input before an initial proposed rule is put out, he said.

CUNA believes that interest-rate risk does not warrant a separate rule, and instead should be handled through the supervisory and examination process.