Reg Reform, Supplemental Capital and the Corporates – Still on the Front Burner

A special message from Mary Martha Fortney, President and CEO,
February 11, 2010

As 2010 marches on, there are still several significant 2009 issues that NASCUS continues to work on, both on the regulatory and legislative fronts.

I would like to brief you on the status of some of these issues, including regulatory reform, supplemental capital and the proposed rule regarding the corporate system.
Regulatory Reform
The Senate continues its work on financial regulatory reform legislation and will consider the House-passed, H.R. 4173, the Wall Street Reform and Consumer Protection Act.

Senate Banking Committee Chairman Chris Dodd (D-Conn.) circulated a regulatory reform discussion draft in November to consolidate the functions of the four federal regulators that oversee banks into a federal agency. The discussion draft also included the creation of a Consumer Financial Protection Agency (CFPA). However, the Senate Banking Committee Chairman is now drafting legislation on a bipartisan basis which may be released this month.

As the legislation moves through the Senate Committee and to the full Senate, NASCUS will continue to pay close attention to preemption issues and to other matters of importance to state regulators and state credit unions. Last minute amendments that were approved when the House approved H.R. 4173 impact the ability of the Office of the Comptroller of the Currency’s (OCC) to preempt state consumer protection laws. The amendments weaken the House Financial Services Committee-approved “floor and not a ceiling” language that allows states to develop and enforce stricter consumer protection laws.

NASCUS is meeting with the Senate Banking Committee staff as it continues drafting new legislation.

Corporate Credit Union Regulations
Comments are due March 9 on NCUA’s comprehensive proposed revisions to Part 704, which changes the regulatory structure for corporate credit unions.  The proposed rule makes changes to five main areas: corporate credit union capital, investments, asset liability management, governance and credit union service organization (CUSO) activities.

A NASCUS state regulators task force worked regulator-to-regulator with NCUA senior staff throughout the proposed rule drafting process. NASCUS will continue the regulator-to-regulator work, as well as file public comments on the rule. Our comments will likely focus on issues impacting state-chartered corporates, corporate governance and the overall regulatory and supervisory plan for the corporate system moving forward. NASCUS’ Legislative and Regulatory Affairs Committee along with NASCUS management is shaping our forthcoming comments.

Supplemental Capital
In early December, NCUA Chairman Debbie Matz expressed her support for supplemental capital for credit unions in a letter to House Financial Services Chairman Barney Frank (D-Mass.) While she was just stating her personal support, and not a determination of the NCUA Board, this is still a big development.

State and federal regulators’ agreement on supplemental capital is critical as we push for the necessary legislative changes and develop regulatory guidelines.  We expect that the NCUA/NASCUS supplemental capital task force will present the NCUA with a white paper on the issue in the near future.

Further, we continue dialogue in Congress to push for the legislative change to net worth to allow for supplemental capital for credit unions. We need this change now, and are hopeful that Congress will concur on the importance of achieving these changes in this Congress.


These are just a few of the issues NASCUS will continue to work on, as well as others impacting the state credit union system. NASCUS has been successful in its priorities due to the excellent leadership of our volunteer Board of Directors, Credit Union Executive Council and Committees, as well as the guidance of our state regulators and advice of credit union executives. Their assistance last year directly influenced the health and stability of the state credit union system. We look forward to continuing this important work in 2010, and beyond.