Ensuring the state charter remains competitive with not only the federal charter, but other depository charters and nondepository entities known as fintechs is a priority for new NASCUS President and CEO Brian Knight, he told trade newspaper American Banker this week.
In comments published Wednesday, Knight said restoring a healthy dual chartering system will lead to a balanced framework between state and federal credit unions. “All credit unions benefit from the healthy competition between charters to innovate and enhance the value of the charter,” he said.
He said NASCUS will advocate for regulation and supervision that enforces safety and soundness while also recognizing technological advancements in the financial services ecosystem.
Knight became NASCUS leader on Jan. 1, succeeding Lucy Ito who retired after seven years in the role. An attorney, Knight has served the state credit union system since 1998; he was most recently executive vice president and general counsel.
The NASCUS leader told the publication that a challenge for state-chartered credit unions is NCUA serves as both insurer and charterer for federal credit unions. He asserted that dual role can “muddy the distinction” between supervising safety and soundness and regulating a charter. That can lead to homogenization among the charters which, he said, weakens the overall credit union system.
That can be manifested, he told the publication, through federal examiners misapplying federal credit union rules to a state charter on an insurance review, which can lead to a form of unnecessary preemption of state authority, he said.
“A healthy dual chartering system is not possible when state innovation is overly constrained by federal preemption,” Knight said. “We need to carefully consider what NCUA rules applicable to state charters unduly preempt state authority and weaken the dual chartering system.”
In any event, the NASCUS leader said the state system’s relationship with NCUA has been on a “positive trajectory that has benefitted the entire system.” He said he anticipates that continuing in 2022.