NCUA joins regulators in proposing rule codifying supervisory guidance

A proposed rule aimed at clarifying and codifying the role of supervisory guidance from federal financial institution regulators was adopted by NCUA this week, joining the federal banking agencies and CFPB in issuing the proposal for comment.

Voting unanimously during a rare second meeting in a month, the NCUA Board joined the banking agencies in issuing (for a 60-day comment period) the proposal on the role of supervisory guidance issued by the agencies. Under the proposal, the meaning of “supervisory guidance” would be clarified as meaning, essentially, it doesn’t have the force of law.

If finalized, the proposal would codify an interagency statement issued by all of the agencies in September 2018. That statement was intended to make clear that, unlike a statute or regulation, supervisory guidance is not the same as statute or regulation. “Supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance,” the 2018 statement read.

A petition brought by banking industry trade groups in 2018 called on the federal banking agencies and CFPB to go further than a statement in clarifying the role of supervisory guidance. The bank groups specifically urged the agencies to make clear that matters requiring attention, matters requiring immediate attention and other such supervisory actions may only be based on a violation of statute or regulation, and not on a failure to comply with supervisory guidance.

NCUA was not a target of the 2018 petition. However, because the agency joined in the 2018 statement, it had to be involved in the considerations for a proposed rule as required by federal regulatory procedure, according to agency staff.

The FDIC Board issued the proposal for comment last week at a meeting of its board. The CFPB and the OCC followed that action and joined the proposal (both of those agencies’ leaders also sit on the FDIC Board). The Federal Reserve has also jumped on the proposal after its board gave the green light.

That left NCUA as the only agency (as of Wednesday) whose leadership had not yet agreed to join the proposed rule, but that had signed the 2018 statement. It was not for a lack of effort. The agency had planned to consider the proposal at its Oct. 15, but pulled the measure off the agenda just as the meeting began. The reason, according to agency staff: it had not yet received word that the other four regulators had completed any revisions to the proposal.

As Scott Neat, associate director of the agency’s office of examination and insurance, told the board this week: the agencies strive to work closely together on joint rulemaking and to issue their proposals at the same time – but it doesn’t always work out that way. “Timing is seldom simultaneous,” Neat said.

However, he also told the board, to ensure that NCUA can “remain timely in its formal approval process of this proposed rule,” the agency convened the board meeting Wednesday to consider it. Typically, the NCUA Board meets only once a month.

In other comments, staff told the NCUA Board members that the proposal will not create a burden for credit unions. That’s at least partially because, they said, the agency has followed the intent of proposal for at least the last seven years. Staff pointed out that NCUA has, at least since 2013, tied all “documents of resolution” for credit unions to specific statutory and regulatory citations – a practice, the agency staff (and board members) vowed would not change under the proposed rule.

Proposed Interagency Rule, Part 791, Role of Supervisory Guidance