Interpretive Ruling and Policy Statement 13-1, Minority Depository Institution Preservation Program for Credit Unions
August 28, 2023
Melane Conyers-Ausbrooks
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428
Re: Interpretive Ruling and Policy Statement 13-1, Minority Depository Institution Preservation Program for Credit Unions
Dear Secretary Conyers-Ausbrooks:
The National Association of State Credit Union Supervisors[1] submits this letter in response to the National Credit Union Administration’s proposed changes and request for comment to Interpretive Ruling and Policy Statement (IRPS) 13-1, Minority Depository Institution (MDI) Preservation Program. Preserving MDIs and supporting the formation of new MDIs within the credit union system is crucial to maintaining a strong and viable credit union system. MDIs further ensure underserved communities retain high-quality financial services.
MDI-designated credit unions provide safe and affordable financial services to members and communities who are often underbanked or unbanked by financial institutions. NASCUS commends NCUA for acknowledging the importance of MDIs by publishing IRPS 13-1 for comment and feedback. We submit the following recommendations for NCUA’s consideration.,
The NCUA’s MDI Preservation Program is designed to comply with section 308 of FIRREA, which requires the NCUA to report on its actions in furtherance of five key goals.[2] Two of the five goals discuss preserving the “minority character of MDIs involved in mergers and acquisitions” and “promoting and encouraging the creation of new MDIs.” NCUA has undertaken significant, and laudable, initiatives to fulfill its FIRREA obligations; unfortunately, barriers remain to the creation of new MDIs.
We recognize that many of these barriers are not of NCUA’s making. For example, the tendency of census data to undercount minority communities might present an impediment to credit unions that would otherwise qualify. We urge NCUA to work with stakeholders to identify other metrics that might ease the path to qualification while maintaining the spirit and intent of the designations. For example, NCUA could consider raising the threshold for self-identification.[3]
There does not appear to be a statutory mandate for use of the Regulatory Flexibility Act definition of small credit union for purposes of MDI designation. [4] This increase would allow more credit unions to demonstrate their compliance with the designation and not rely on the rigid and outdated reporting construct of census tracts. Amendments to consider include evaluating and addressing community impact strategies that would provide for the preservation and innovation of MDIs. Credit union and community impact strategies are not solely created around census tract data.
NASCUS appreciates the need to ensure the MDI designation remains meaningful and adheres to the statutory intent. However, we think the perseveration of the MDI community, both existing credit unions and potential designees, would be enhanced by ensuring that credit unions committed to the MDI principles can qualify for the MDI benefits. This is particularly important to allow some credit unions to complete their journey toward the existing qualifications.
Another example of this flexibility could be reevaluating the merger rules related to MDI. We unreservedly agree that should an MDI credit union need to be merged; the first candidates should be other existing MDIs. However, should no other existing MDIs be available, there could be a process by which a non-MDI merger partner could retain the MDI designation for an established “cure” period should it commit to achieving the qualifications.
It is also pertinent to address the NCUA’s work with state regulators in the event of a merger of a state-chartered institution. It is important deference to the prudential regulator is maintained to develop solutions and assist in identifying merger partners. NCUA should work closely with state regulators to ensure that the general preference guidelines are applied seamlessly in the consideration of MDI and non-MDI potential merger partners for troubled state-chartered institutions.
Engagement with MDIs and Industry Stakeholders
The IRPS indicates the NCUA will provide continual engagement with MDIs through interaction with headquarters and field staff. This interaction includes sharing information and expertise on supervisory topics using various venues to engage in an open dialogue between NCUA, MDIs, and related organizations. Given the challenges facing many credit unions seeking the MDI designation, NASCUS strongly encourages the NCUA to work with the state regulators and state credit union leagues to identify educational opportunities for all parties.
NASCUS and our members remain committed to working with NCUA on key issues and wholly support the NCUA’s efforts to preserve and support the growth of MDI-designated credit unions. Not reviewing and evolving the MDI designation requirements beyond the current framework will continue to result in unintended consequences. Credit unions with MDI characteristics, but not the designation, will remain unable to participate in or secure grant and investment opportunities offered through government, industry, and public entities.
In closing, we would also recommend NCUA re-open or otherwise extend the solicitation of feedback from the current credit union MDI community and adjacent stakeholders. During NASCUS’s outreach on these important issues, it was apparent in some cases, that current industry and economic challenges obscured the publication of this important IRPS.
Sincerely,
Sarah Stevenson
Vice President, Regulatory Affairs
NASCUS
[1] NASCUS is the professional association of the nation’s 46 state credit union regulatory agencies that charter and supervise over 1,900 state credit unions. NASCUS membership includes state regulatory agencies, state-chartered and federally-chartered credit unions, and other important stakeholders in the state system. State-chartered credit unions hold over half the $2.2 trillion assets in the credit union system and are proud to represent nearly half of the 136.5 million credit union members.
[2] Public Law 101-73, Title III, Sec. 308, 103 Stat. 353 (1989), as amended by Public Law 111 – 203, Title III, sec. 367(4)
[3] We note that the requirements for bank designation provide greater flexibility for qualification.
[4] 5 U.S.C 601 et. seq.