Happy New Year! We look forward to a strong 2016 for the state credit union system, particularly as NASCUS works for progress on a range of significant issues – one of which shifts into higher gear in less than two weeks. Here’s a quick rundown of some of our top priorities for the next 12 months:
Ensure fair and transparent OTR through the promised “notice and comment.” We will push for transparency in NCUA’s overhead transfer rate (OTR) methodology, to ensure that there is equitable treatment of state regulators relative to the federal agency, and for equity in the costs borne by state versus federal credit unions. At its Jan. 21 meeting, the NCUA Board is expected to publish in the Federal Register the existing methodology for the OTR and the operating fee schedule for federal credit unions, as well as the agency’s proposed 2017-2021 Strategic Plan, giving stakeholders the opportunity to comment on all three items. We will follow up by strongly urging state regulators and credit unions to engage vigorously in the comment period. NASCUS will also continue to support legislation pending in Congress (such as H.R. 1176, the NCUA Budget Transparency Act), which would provide oversight, accountability and transparency to NCUA’s budget process, including the OTR.
Affirm use of supplemental capital. As NCUA heads toward 2018 implementation of its new risk-based capital (RBC) rule, NASCUS will robustly advocate to affirm credit unions’ authority to include secondary capital for purposes of calculating risk-based capital.
Inject the state system voice directly into NCUA Board deliberations. NASCUS has long pursued a goal of expanding the NCUA Board to five members (instead of three), with one board seat designated for an individual with state credit union regulatory experience to mitigate the effect of NCUA’s inherent conflict of interest as both the insurer and charterer/regulator of federal credit unions. State regulator representation on the NCUA Board can serve as a check on any tendency for NCUA to favor federal credit unions as insurer of both state and federal credit unions and as the sole charterer/regulator of federal credit unions. We will look for every opportunity to bring this issue to Congress for consideration.
Protect charter choice and a robust dual chartering system. We will continue to speak out about preserving and protecting charter choice and the dual-charter credit union system. With its built-in system of checks and balances, dual chartering assures that American consumers prosper from ongoing modernization and innovation in both the state and federal regulatory frameworks – which guards against federal regulatory overreach and makes for a stronger credit union system overall.
And there’s more on the planning boards for 2016, such as more tools and information to help the state system deal effectively with federal regulation, as well as more conferences and schools, including our third annual Cybersecurity Symposium (Aug. 1-2 in Chicago), the highly acclaimed Bank Secrecy Act (BSA) Conference (Nov. 13-15 in San Antonio) and, of course, the annual NASCUS State System Summit in Chicago (Oct. 5-7).
We told you recently that NCUA was inaugurating its new Credit Union Service Organization (CUSO) registry starting with the New Year. Now look forward later this month to a “Letter to Credit Unions” on the new tool, which will likely contain additional information about the new registry, which opens Feb. 1. According to a letter sent last month by NCUA to credit union vendors, CUSOs will have until March 31 to register.
Some of registry data collected will be made publicly accessible at some point, including with state regulators. NASCUS anticipates that, after the initial registration period closes March 31, NCUA will review the data for accuracy and that, sometime around mid-year, some of the registry data will be made accessible. However, in a website posting, NCUA has pledged proprietary information will be non-public. “NCUA is committed to securing this data as required by FOIA, and will not release such information,” the posting states. The posting also notes that the agency “will share CUSO information with state supervisory authorities that have a signed information-sharing agreement with the agency.”
Key points about the NCUA’s new rule on pass-through share insurance for certain escrow accounts (including Interest on Lawyer Trust Accounts, IOLTAs, and “other similar escrow accounts”) are outlined in a NASCUS summary of the regulation, now available on the website. NCUA late last year finalized amendments to its share insurance regulations to reflect enactment of the Credit Union Share Insurance Parity Act (IPA), which required the agency to provide enhanced, pass-through share insurance for accounts, and which is “intended to ensure insurance parity for similar accounts under NCUA and Federal Deposit Insurance Corporation (FDIC) regulations. The final rule, adopted by the NCUA Board Dec. 17, is effective Jan. 27 (30 days after publication in the Federal Register).
IOLTAs fall into a category of accounts that pose additional risks, the summary points out. It notes that the Federal Financial Institutions Examination Council (FFIEC) has warned financial institutions of additional risks that may be related to servicing accounts established and maintained by professional service providers such as attorneys, accountants and other third parties that act as financial liaisons for their clients. IOLTAs, the summary points out, are among these accounts.
A study of the impact of the 2010 Dodd-Frank legislation on credit unions and smaller banks indicates a moderate to minimal initial reduction in the availability of credit, according to the results revealed by the U.S. Government Accountability Office (GAO) last week. However, the study, issued Dec. 30, also notes “more significant effects may arise in the future and the full impact of the Dodd-Frank Act has yet to be seen as many of the regulations have yet to be implemented and insufficient time has passed to evaluate the regulations that have been implemented.”
GAO is required to annually study regulations issued by federal financial institution regulators related to Dodd Frank. This year’s report examines the regulatory analyses federal agencies conducted during the Dodd-Frank Act rulemakings; the possible impact of certain Dodd-Frank provisions and related regulations on credit unions and community banks, and; the possible impact of Dodd-Frank Act provisions and related regulations on financial market stability.
In April 2012, NASCUS met with GAO to discuss the legislation and the general regulatory and compliance landscape affecting credit unions. In that meeting, NASCUS stressed that significant changes in regulation require time and money in terms of training for examiners to get up to speed on new regulations, as well as for training and implementation at the credit union operational level.
Our Jan. 28 event in Orlando may be labeled the “Florida Directors’ College,” but it’s not just for Sunshine State residents – anyone, from anywhere, may attend. This intense, one-day program focuses on the relevant details committee members, directors and staff need to know — and skips the fluff. Among the key issues to be discussed: What directors must know about regulatory issues; the challenges and opportunities related to member business lending; the real threats to cyber security, and; the complexities of third-party relationships with your credit union. So, whether you are in Maine or Montana – or anywhere in between – this may be the program you are looking for. See the link for more details.
BRIEFLY: Corrections to Reg Z; pot CU lawsuit dismissed; EGRPRA deadline
Technical corrections to Reg Z – and to “official interpretations of Reg Z” – which were inadvertently left out of federal postings, have been published by the Consumer Financial Protection Bureau. No substantive changes have been made to the TILA-RESPA final rule; the corrections were effective as of Dec. 24 … A federal judge last week dismissed a lawsuit brought by Fourth Corner CU of Denver to force the Federal Reserve Bank of Kansas City to grant a “master account” to the fledgling credit union, which was chartered to serve Colorado’s legal marijuana business … March 22 is the comment deadline for NCUA’s final regulatory review (out of a total of four) under the agency’s participation in the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA).
Patrick Keefe, NASCUS Communications, firstname.lastname@example.org or (703) 528-5974