Changes for OTR, new sub debt rules cited as achievements by retiring leader

NASCUS’ Lucy Ito discusses achievements and NASCUS, and the outlook for credit unions, during her interview with Mike Lawson, (click on the arrow to view the complete video)

(June 4, 2021) Bringing attention to the overhead transfer rate (OTR) policies of NCUA, and securing authority for credit unions to issue subordinated debt, are two of the achievements NASCUS President and CEO Lucy Ito cited as attained during her tenure as leader of the state system organization during a video interview this week.

In May, Ito announced that she would retire from her position at the association, effective at the beginning of 2022.

Responding to questions from Mike Lawson of CUBroadcast (a web-based video interview program) Ito said that raising awareness of the OTR – the rate at which the agency transfers funds from National Credit Union Share Insurance Fund (NCUSIF) to cover insurance-related operating costs of the agency – ultimately resulted in the agency making changes to the formula for determining the rate.

In 2017, the NCUA Board voted to adopt a “simplified approach” to setting the rate, reflecting that “safety and soundness is not the sole domain of the insurer.” Reform of the OTR methodology had been a target for NASCUS and the state system for more than 20 years.

She also noted as an achievement the new subordinated debt rule, which was finalized by NCUA in December and is scheduled to take effect at the beginning of 2022. The rule would allow well-capitalized, federally insured credit unions to count subordinated debt as capital for risk-based net worth purposes. It was long sought by the state system, which has argued that such a rule would bring regulation of federally insured credit unions in line with regulations of some states that already allow their credit unions to issue secondary capital, including in the form of subordinated debt.

However, in her interview this week, Ito said the state system continues to look for changes in the rule. She noted the benefit of having a rule in place, and that “that’s something we can work with.”

In other comments during the 20-minute interview, Ito:

  • Noted the common denominators of people who work in credit unions as being “service and duty.”
  • Reflected on the commonalities of state regulators and leaders of credit unions, as both groups are service oriented and really feel a responsibility to protect and help others.”
  • Suggested that the best way for the credit union community to succeed and maintain relevancy to consumers — in the face of mounting competition from such things as digital currencies and players such as PayPal – is collaboration among themselves and their related organizations (including associations). “Where there are shared problems, and shared objectives, let’s work together to address both,” she said.