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PrintPRESS RELEASE
May 20, 2009
NASCUS Recommends Enhanced Regulatory Oversight and Capital Reform to Prevent Future Losses in Corporate System
ARLINGTON, Va. — NASCUS testified before the House Subcommittee on Financial Institutions and Consumer Credit today on the actions necessary to mitigate the impact of corporate credit union system losses and prevent a recurrence of the current situation.
NASCUS Chairman George Reynolds, senior deputy commissioner of the Georgia Department of Banking and Finance, represented NASCUS at the hearing. Reynolds expressed NASCUS' support for corporate credit union provisions in S. 896, legislation awaiting the President's signature, and Congressman Paul Kanjorski's (D-Pa.) legislative efforts to address corporate credit union issues. Reynolds stressed that allowing credit unions to recapitalize the insurance fund over a longer period of time provides important flexibility to credit unions and promotes safety and soundness.
However, while the legislation will mitigate the impact of corporate credit union losses, Reynolds suggested additional recommendations to guard against the repeated confluence of factors that contributed to the current situation. Reynolds told the Subcommittee that the following actions should be taken: identify contributing factors and critically analyze regulation; revisit past regulatory assumptions regarding concentration and systemic structure; develop improved oversight and require more prudent risk management expertise; and reaffirm the consultation and cooperation between state and federal regulators.
"Regulators should focus on ensuring any credit union, natural person or corporate, has robust risk management and mitigation policies in place to balance its investment portfolios," stated Reynolds. "Such policies should include adequate reserves, requisite expertise, concentration limits and meaningful shock testing and valuation mechanisms."
From a regulatory perspective, Reynolds said regulators must identify contributing factors and critically analyze future regulation to ensure proper policies and procedures are in place. NASCUS also stressed the necessity for capital reform for both corporates and natural person credit unions.
"NASCUS believes that after recent events corporate credit unions must retain higher capital reserves," said Reynolds. “NCUA should work with NASCUS and state regulators to develop more comprehensive capital requirements, including risk-based capital."
NASCUS also urged the Subcommittee to allow natural person credit unions to access supplemental capital. Reynolds added that if credit unions could use supplemental capital, it might have mitigated some of the unintended consequences to net worth categories at natural person credit unions.
In addition, Reynolds encouraged the Subcommittee to recognize state authority in the supervision of state-chartered corporate credit unions and to continue support for transparency and consultation between state and federal regulators.
NASCUS' full written testimony can be downloaded at this link.
Kate Hartig, VP, Public Relations and Legislative Affairs, (703) 528-0669 or kate@nascus.org