April 12, 2019 NASCUS Report

Big changes at NCUA: new chairman, new member, full 3-person board

A new chairman, a new board member, and a full board complement for the first time in nearly three years is the new reality for NCUA as a result of developments and changes made this week.

Starting off the week: in a surprising development, Rodney E. Hood –confirmed by the Senate March 14 as a member of the NCUA Board – was designated chairman Monday by President Donald Trump. Hood, a Republican appointee, is serving his second term on the board; he served previously from 2005-09, including as vice chairman (an unofficial role sometimes designated for another member of the board by the sitting chairman).

Hood replaced then-sitting Board Chairman J. Mark McWatters, who himself was designated by Trump as chairman in early 2017 (one of the president’s first appointments for a federal financial institution regulator). A Republican, McWatters remains on the board as a member; his term ends in August. He first joined the board in 2014, after being nominated by President Barack Obama.

McWatters, in fact, on Monday administered the oath of office to Hood; NCUA said the action was McWatters’ last, official one as chairman. He also swore in new Board Member Todd M. Harper (a Democrat appointee) the same day. Harper, like Hood, was confirmed for the position by the Senate March 14.

Hood is now serving a term that ends in August, 2023. “Over the next four years, I will be especially honored to lead the talented and professional NCUA team while doing my level best to ensure that they have the necessary resources to respond nimbly to today’s market risks and emerging issues,” Hood said in a statement released with the announcement of his designation as chairman. “As Chairman, I look forward to enhancing and modernizing the federal credit union charter, addressing the issues of capital reform and cyber security, creating opportunities for credit unions to serve vulnerable communities, and reducing regulatory burdens.”

Hood was most recently corporate responsibility manager for JPMorgan Chase and Co. where, according to a biography released by NCUA, he managed national partnerships with non-profit organizations promoting financial inclusion and “shared prosperity for underserved communities.” He previously served as associate administrator of the Rural Housing Service at the U.S. Agriculture Department, and as a member of the board of governors for the University of North Carolina. He has also held management positions in retail finance, commercial banking, affordable housing and community development at G.E. Capital, Bank of America, Wells Fargo and North Carolina Mutual Life Insurance Company, the bio stated.

With the installations of Hood and Harper to their seats, and the continuing role of McWatters, the board is now at its full three members for the first time since 2016, when former Chairman Debbie Matz (a Democrat) retired from the board. Since then, McWatters and former Board Member (and Chairman) Rick Metsger have served on the board.

Hood takes the seat formerly occupied by Metsger (who left last month; his term had expired in August 2017); Harper takes the seat formerly held by Matz.

LINKS:
NCUA release: President Trump Designates Rodney E. Hood as Chairman of the NCUA Board

ITO: STATE SYSTEM WELCOMES HOOD, LOOKS FORWARD TO WORK AHEAD

In a statement to the press, NASCUS President and CEO Lucy Ito said the state system welcomes Hood to his new role, and noted his commitment to capital reform, cybersecurity and strengthening the credit union charter. “We have long held that it is critical that a supplemental capital rule be in place ahead of the next financial crisis to help protect the National Credit Union Share Insurance Fund from losses,” Ito said. “In recent years, states have taken the lead on cybersecurity and charter modernization and NASCUS, as the voice of the state credit union system, looks forward to sharing state experience on regulatory and supervisory innovation to protect credit unions from cyber threats and enhance the federal charter to promote credit union growth and stability.”

The NASCUS leader also underscored the “collaborative working relationship” the state system developed with McWatters as chairman; she said NASCUS looks forward “to continuing a productive partnership with NCUA under Chairman Hood’s leadership.”

LINK:
NASCUS welcomes newly designated NCUA Chairman Rodney Hood

HARPER TAKES SEAT TOO; STATE SYSTEM SHARES OBJECTIVES

Meanwhile, new Board Member Harper also joined the board, his latest position since leaving NCUA as a member of the executive staff. Most recently the director of the agency’s Office of Public and Congressional Affairs and chief policy advisor to former NCUA Board Chairmen Matz and Metsger (both Democrats) Harper earlier was director for the House subcommittee on capital markets. His bio released by the White House noted that, in his role in the House, “he contributed to the efforts after the financial crisis to enact the Dodd-Frank Wall Street Reform and Consumer Protection Act.”

Prior to that, Harper worked as legislative director for former Rep. Paul E. Kanjorski (D-Pa.), during which time he worked on “bipartisan legislation concerning credit union capital rules, terrorism risk insurance, auditing standards, and subprime mortgage lending,” according to the bio. He earned his B.S. from Indiana University and a master’s in public policy from the Harvard University Kennedy School of Government.

NASCUS’ Ito noted that the state system shares the objectives Harper outlined in the announcement of his joining the board. “My priorities will be to safeguard the safety and soundness of federally insured credit unions, preserve the integrity of the credit union industry in a continually evolving and increasingly complex marketplace, and protect taxpayers and credit union members from losses to the Share Insurance Fund,” he said. Ito noted that the state system “eagerly anticipates cooperating with the full, three-person NCUA Board on NCUA’s Regulatory Reform Agenda and other issues impacting the credit union system.”

LINKS:
NCUA release: Harper Sworn in as NCUA Board Member

NASCUS welcomes Harper to the NCUA Board

NEW BOARD WILL LOOK AT PROPOSAL ON LOAN COMPENSATION

A proposed rule on compensation in connection with loans to members will be considered by the full, three-person NCUA Board when it meets next week in Alexandria, Va., for its regular monthly meeting.

The advanced notice of proposed rulemaking (on Part 701.21 of the agency’s rules and regulations) will be the first to be considered by the full-member board, as well as the new chairman and new board member, Rodney E. Hood and Todd Harper, respectively. The proposal under consideration applies to federally insured, state chartered credit unions (FISCUs) in part by incorporation to sec. 741.203 of the agency’s rules. Applicable provisions are those dealing with prohibited fees, non-preferential loans and third-party servicing of indirect vehicle loans.

The April open meeting of the NCUA Board is set for 10 a.m. Thursday (April 18) at agency headquarters in Alexandria, Va.

LINK:
NCUA Board agenda, April 18

… AND PUTS OFF MAY MEETING BY ONE WEEK

The second meeting of the NCUA Board in May with its full membership of three will be delayed – by one week – the agency announced this week (most likely due to a scheduling conflict). Instead of holding the meeting May 16, the agency said the meeting was rescheduled May 23. The meeting start time remains at 10 a.m.

VETERANS ON PATH TO FINANCIAL WELL-BEING; SOME QUESTIONS REMAIN

Veterans report higher levels of financial well-being than the average U.S. adult, and there is a pathway from financial skill to that well being, an analysis released by the CFPB this week stated. But the study also raised some questions, the bureau noted.

The evaluation focused on veterans that responded to a financial well-being survey in 2015. Those results also were the basis for the bureau’s financial well-being scale developed in 2016. The agency said that, although the 2015 survey was not specifically targeted to veterans and was not a nationally representative sample, a sizeable number of respondents identified as veterans. The CFPB analyzed the veteran responses to produce the research brief released Tuesday.

The bureau said it found that veterans reported higher levels of financial well-being than the average U.S. adult. It noted that an analysis of the veteran survey responses found evidence that financial skills (e.g. making a budget, not overspending, etc.) “is positively associated with financial behavior, which is also positively associated with financial situation and higher levels of financial well-being. This analysis suggests that, for veterans, there is a pathway from financial skill to financial well-being.”

The study raised additional questions however, the bureau stated. “For example, the study does not answer whether the higher financial well-being scores for veterans are related to military service or are related to the demographic, attitudinal, and situational characteristics of the veteran that would be similar in non-veterans who shared those characteristics. Further research is necessary to discern whether the associated characteristics and experiences identified herein are truly related to military service,” the report states.

The analysis – like all other significant bureau studies and reports – is available via the NASCUS CFPB pages on the website (as well as directly via the link below).

LINKS:
CFPB analysis: Financial Well-Being of Veterans

NASCUS CFPB news, updates

SYMPOSIUM LOOKS AT TECHNICAL SIDE OF USING CECL

An update on the current expected credit loss (CECL) accounting standard was the focus of a two-day symposium this week in Charlotte, N.C., sponsored by NASCUS, the Carolinas Credit Union League and the North Carolina Credit Union Division. The sessions are part of an on-going effort by NASCUS to offer more information to the state system about the new accounting standard.

CECL, adopted in 2016 by the Financial Accounting Standards Board (FASB), is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. More specifically, the standard requires financial institutions to estimate expected losses over the remaining life of the loans, as opposed to incurred losses of the current standard. It takes full effect for most credit unions for fiscal years beginning after Dec. 15, 2021 (credit unions would not need to begin reporting data on call reports until the beginning of 2022).

The Wednesday-Thursday conference covered such issues related to the standard (officially known as Accounting Standards Update (ASU) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments) as current allowance levels in the credit union industry and how they may be impacted by CECL; technical training on functionality of Microsoft Excel, and how this can be used for CECL implementation; different methodologies to be used potentially for the calculation of CECL using real data (going step by step on how the computations will be done); and more.

The next CECL session is set for May 21-22 in Louisville, Ky., sponsored in conjunction with the Kentucky Department of Financial Institutions.

LINK:
NASCUS 2019 education agenda

… NASCUS 101 JUST AROUND THE CORNER

There is still plenty of time to register for the NASCUS 101 Member Orientation, coming up April 25. A one-hour (no charge) webinar that brings together members, prospective members or anyone else interested in NASCUS to better understand the unique tools and benefits NASCUS offers, it also offers attendees an opportunity to hear from their peers in NASCUS—a member network of state regulators, credit unions, credit union leagues, and other system supporters—and how they leverage their NASCUS membership. The webinar ends with a Q&A session. Advance registration required; sign up today!

LINK:
Agenda, registration for April 25 NASCUS 101 webinar (no charge)

AROUND THE STATES: WA adopts changes to FOM, parity, investments

Recently, Washington Gov. Jay Inslee (D) signed HB 1247, which permits credit unions to better serve their members, creates consumer access, and gives the state regulatory agencies the authority necessary to provide strong oversight. This bill makes the following six updates to state statute:

• Increases the limit on investments in CUSOs not exclusively owned by credit unions;
• Grants the regulator authority over approving investments;
• Permits virtual membership meetings;
• Parity can be granted to other state acts
• Authorizes the regulator to grant nationwide fields of membership; and
• Account verification required every two years rather than annually.

The legislation is effective July 28.