Defending State Authority, One Regulation at a Time

A special message from Mary Martha Fortney, President and CEO,
July 2013

NASCUS is the only organization exclusively dedicated to defending and advancing a strong state credit union system. Advancing and defending state authority is important work that takes time and sometimes happens behind the scenes. This month, I wanted to highlight a recent NASCUS success on behalf of state credit unions and state regulators related to NCUA's loan participations rule made final in June.

Though state regulators shared some of NCUA's concerns regarding the risks associated with loan participations within the credit union system, NCUA's initial proposed rule, published in late 2011, was problematic to NASCUS and many state regulators because it preempted some state participation loan rules. NASCUS management and state regulators began having conversations with NCUA about our issues with the proposed rule as soon as the proposal was published.

NASCUS is pleased to tell you that we believe NCUA listened to our concerns about the proposed rule.

The final rule approved by the NCUA Board is a marked improvement for the state system in several areas. For instance, it does contain some important differences for state-chartered federally insured credit unions. Most significantly, the final rule contains a 5% minimum risk retention for federally insured state-charters while maintaining the higher 10% risk retention for federal credit unions.

The rule also corrects a discrepancy in NCUA's rules that had required federally insured state-chartered credit unions to seek prior NCUA approval before participating in some loans while NCUA required no such prior approval for federal credit unions. At NASCUS' request, the rule now treats both state and federal credit unions the same by eliminating the prior approval requirement for participations that comply with the new final rule.

NASCUS had been having conversations with NCUA regarding these critical issues and we, along with the state credit union community are pleased they heard us. "Thank you, NASCUS, for working to protect state authority and for bringing a bit more parity to states and state charters," said Bob Entringer, Commissioner of North Dakota's Department of Financial Institutions.

For another example of NASCUS' recent work to protect of state authority, click here for information on our efforts on the NCUA's Troubled Condition final rule.

NASCUS will continue to remind NCUA to defer to state authority wherever possible and to reserve rulemaking for only the most material safety and soundness issues. NASCUS feels the loan participations rule demonstrates that NCUA seriously considered the concerns voiced by NASCUS and state regulators and amended the proposal accordingly.


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