July 14, ’17 NASCUS Report

Board to consider comment period about closing corporate fund

A public comment period about closing the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) – the fund established by NCUA to resolve troubled corporate credit unions – will be considered by the NCUA Board when it meets next week for its July open board session in Alexandria, Va. The two-member board will also consider setting the National Credit Union Share Insurance Fund “normal operating level” during the meeting, and a proposed rule on Part 741 of its rules and regulations (requirements for insurance) about share insurance fund equity distributions.

Closing the corporate stabilization fund has been the top priority for NCUA Chairman J. Mark McWatters, as outlined early in the year. “It is important that the agency maintain a strong Share Insurance Fund for the mutual benefit of the credit union community and the taxpayers,” he said in a February speech to the CUNA Governmental Affairs Conference. “It is also important for the NCUA to avoid or minimize any insurance fund premiums, whenever the agency may do so responsibly, and keep that money at work in the credit union community. We have a potential opportunity to accomplish both of these objectives by closing, in 2017, the Temporary Corporate Credit Union Stabilization Fund into the Share Insurance Fund,” he said. Also in that speech, McWatters asserted that closing the fund would trigger the “multi-year process” of rebating surplus funds to federally insured credit unions, “putting this money back to work in the community as soon as possible and, preferably, before the end of this year.”

In other action and reports at its 10 a.m. meeting July 20, the board will:

  • Consider a proposed rule on emergency mergers under Part 701 (Organization and Operations of Federal Credit Unions);
  • Hear a board briefing on the agency budget at mid-year;
  • Hear a 2nd quarter ’17 report on the share insurance fund.

NCUA Board agenda, July 20


The new, proposed corporate rule issued by NCUA at its June board meeting includes three important elements that are designed to help meet the agency’s goal of modifying the approaching capital framework benchmarks established in 2010 as part of the regulatory restructuring of the corporate system, according to a summary of the proposal published this week by NASCUS. The three key elements of the proposal identified in the proposal – which would apply to both federal corporate credit unions and state chartered corporate credit unions – as outlined in the summary are:

  • Definition of Tier 1 Capital: NCUA proposes incorporating ‘‘GAAP equity acquired in a merger’’ as a component of retained earnings, which is included in the definition of “tier 1 capital” of corporates, to improve transparency. Plus, the summary notes, the proposal recommends “allowing corporate credit unions to count as Tier 1 capital all contributed capital from a source not covered by federal share insurance.”
  • Retained Earnings Ratio: The agency proposes eliminating a prohibition, starting in 2020, on counting any contributed capital in excess of retained earnings toward the leverage ratio. However, NCUA also wants to require all corporates to achieve an eventual retained earnings ratio of 250 basis points. “NCUA would do this by adding a definition of ‘’retained earnings ratio’’ that would be the corporate credit union’s retained earnings divided by its moving daily average net assets,” the summary states
  • Expanded Investment Authorities: NCUA proposes amending the requirements for expanded investment authority to add a ‘‘retained earnings ratio’’ requirement which reflects the 2.5% rate. “Likewise, to the provision that allows an NEV decline to 35%, NCUA proposes adding a 3% retained earnings requirement,” the summary states.

Comments on the proposal are due Sept. 1.

NASCUS Summary: NCUA proposed rule, Corporate credit unions


A spending bill which includes provisions that would subject the budgets of NCUA and other federal financial institution regulatory agencies to the congressional appropriations process was approved Thursday night by the House Appropriations Committee and sent to the House floor. In doing so, the committee rejected amendments that would have stripped the bill of the provisions (and 88 pages of other sections taken from the Financial CHOICE Act (HR 10) which has already passed the House), largely on partisan votes. The appropriations bill, if it becomes law, would mark the first time the federal credit union regulator, as an independent regulator, would face congressional budget approval. Additionally, the bill is opposed by both national credit union trade groups (the Credit Union National Association (CUNA) and the National Association of Federally-insured Credit Unions (NAFCU)). The bill also contains provisions sharply limiting funding for the Community Development Financial Institutions (CDFI) Fund, and outright eliminates funding for NCUA’s Community Development Revolving Loan Fund (CDRLF). The credit union groups have advocated for full funding of both the CDFI and CDRLF.


A ban on mandatory arbitration clauses – such as those covering consumer financial products, including credit cards and bank accounts, and which block consumers from joining in class actions to sue for alleged wrongdoing – was announced this week by the CFPB, followed by a near-immediate outcry from trade groups and members of Congress.

According to the bureau, under the rule banning the clauses (which will become effective 60 days following its publication in the Federal Register, and will apply to contracts entered into more than 180 days after that) companies can still include arbitration clauses in their contracts. However, companies subject to the rule may not use arbitration clauses to stop consumers from being part of a group action. The rule also makes the individual arbitration process more transparent, CFPB stated, by requiring companies to submit to the bureau certain records, including initial claims and counterclaims, answers to these claims and counterclaims, and awards issued in arbitration.

Exemptions under the new rule include those for broker dealers and investment advisers overseen by state regulators; employers when offering consumer financial products or services for employees as an employee benefit; entities regulated by the Securities and Exchange Commission or the Commodity Futures Trading Commission, which have their own arbitration rules; and state and tribal governments that have sovereign immunity from private lawsuits.

National credit union trade groups NAFCU and CUNA criticized the rule, arguing that credit unions should be exempt from the rulemaking as they are not the bad actors the rule is meant to target. (On the other hand, more than 300 consumer, civil rights, labor, community, and non-profit organizations wrote to the bureau supporting its rule.) Meanwhile, at least two senators indicated they would overturn the rule. Senate Banking Committee Chairman Mike Crapo (R-Idaho) and Committee Member Sen. Tom Cotton (R-Arkansas) said they intend to seek use the Congressional Review Act to repeal the rule. The law allows Congress to review new federal regulations issued by government agencies and overturn them with a simple majority, as long as they do so within 60 legislative days (i.e., days that Congress is actually in session, rather than simple calendar days). Otherwise, the rule goes into effect at the end of this period.

CFPB: New protections against mandatory arbitration

Text of the new CFPB arbitration rule

NASCUS Summary: Proposed Rule, Arbitration Agreements


Updates to the “Know Before You Owe” mortgage disclosure rule from CFPB, with amendments intended to formalize guidance in the rule, were released by the bureau last week, with the agency stating that the updates are aimed at providing “greater clarity and certainty.” The changes will facilitate implementation of the Know Before You Owe rule by the mortgage industry; CFPB stated it is also releasing a limited follow-up proposal to address an additional implementation issue.

Among the issues that the amendments address are:

  • Tolerances for the total of payments: The updates include tolerance provisions for the total of payments that parallel the tolerances for the finance charge and disclosures affected by the finance charge.
  • Housing assistance lending: The update promotes housing assistance lending by clarifying that recording fees and transfer taxes may be charged in connection with those transactions without losing eligibility for the partial exemption. It also excludes recording fees and transfer taxes from the exemption’s limits on costs.
  • Cooperatives: The updates extend the rule’s coverage to include all cooperative units. Currently, the rule only covers transactions secured by real property, as defined under state law.
  • Privacy and sharing of information: CFPB stated it is finalizing additional commentary to clarify how a creditor may provide separate disclosure forms to the consumer and the seller.

‘Know Before You Owe’ finalized amendments

‘Know Before You Owe’ proposal


Three new representatives from state-chartered credit unions to the CFPB’s Credit Union Advisory Council were named last week, out of the four total joining the panel. Named to the council from state credit unions are: Kayce Bell, Chief Development Officer, Alabama Credit Union, Tuscaloosa, Ala.; Jack Fallis, President and CEO, Global Credit Union, Spokane, Wash.; and David Tuyo, Senior Executive Vice President and Chief Financial and Operations Officer, Power Financial Credit Union, Pembroke Pines, Fla. Luis Peralta, Chief Administrative Officer, Kinecta Federal Credit Union, Manhattan Beach, Calif., was also named. As of last September, there were 18 members of the council, seven of which represented state-chartered credit unions. The most recent meeting of the council was March 30.


As expected, Randal K. Quarles was nominated this week to serve at the Federal Reserve Board as vice chairman for supervision. Nominated for a four-year term, he will be the first to occupy the post since its creation under the 2010 Dodd-Frank Act. President Donald Trump also announced that Quarles, a former Treasury official in the Bush Administration, is nominated to serve consecutive terms on the Fed Board: the first term ends Feb. 2; he is also nominated to be re-appointed to a 14-year term that actually starts the day before the first term ends. If confirmed by the Senate as vice chairman, Quarles will oversee much of the Fed’s banking supervision, including oversight of Wall Street. In the Bush Administration (from 2002-06) he served as (among other things) undersecretary of domestic finance, a position that plays a key role in federal financial institution regulation.

Meanwhile, reports continue to pile up that Gary D. Cohn – now the director of the president’s National Economic Council – will be appointed by President Trump to replace Fed Chairman Janet Yellen when her term at the helm of the board ends next February. Considered one of the most influential of the president’s advisers (and chief economic advice-giver), Cohn is a former president and chief operating officer of Wall Street investment giant Goldman Sachs.

Also this week: nominee for FDIC Chairman James Clinger withdrew from consideration for the post. A longtime Republican staff member of the House Financial Services Committee, he was nominated in June.


Only two more weeks remain before the July 28 deadline to submit your nomination for the 2017 Pierre Jay Award, which honors outstanding individual service, leadership and commitment to the state credit union system. Eligibility for nomination to this year’s award is open to anyone, program or organization making a significant contribution to the state credit union system over the last year (or years). However, only NASCUS members are eligible to submit a nomination for consideration. The award is named for Pierre Jay, the first Commissioner of Banks in Massachusetts, who learned of the cooperative credit union movement in Milan, Italy and quickly embraced the concept. He went on to champion credit union development in the United States. Through his perseverance and service, he profoundly shaped credit union history.

“Late next month, when the state system gathers in San Diego to celebrate our 2017 State System Summit over a four-day period, we will be bestowing the Pierre Jay Award on a worthy individual, program or organization,” said NASCUS President and CEO Lucy Ito. “It’s a terrific opportunity for the state system to honor someone or an organization that has worked to push forward our ideals, values and goals.”

The NASCUS Summit is Aug. 29-Sept. 1 at the Westin Gaslamp Quarter Hotel in San Diego.

Pierre Jay Award nomination form, entry rules and more


The 2017 NASCUS State System Summit is approaching fast – and so are some significant deadlines, including the hotel cutoff date of Aug. 8 to obtain our special Summit rate. Our headquarters for this year’s event: the Westin Gaslamp Quarter Hotel, located conveniently on the border of the historic Gaslamp Quarter. Set for Aug. 29-Sept. 1 in San Diego, the NASCUS State System Summit is a unique conference where credit union regulators and practitioners come together for dialog and exchange. Issues, best practices, emerging trends and – as is the focus in this year’s event – the future of certain aspects of the credit union system. Among those who are gathering to discuss these trends and developments with Summit participants: NCUA Board Member Rick Metsger, cybersecurity expert Jim Stickley, marijuana business banking expert Sundie Seefried (CEO of Partner Colorado Credit Union in Denver) and many more. Key topics at the event include Fintechevolving field of membership (FOM) requirementsthe future of the corporate system, cybersecurity, outlook for CFPB – and more. Find out more about the 2017 Summit – including registration and hotel reservations – at the event’s website, linked below.

2017 NASCUS State System Summit, Aug. 29-Sept. 1, San Diego

BRIEFLY: New CA chief examiner; international doings; biz comment date extended

Joni Kimbrell is the new chief examiner for credit unions at the California Department of Business Oversight (DBO); she’s a veteran regulator, having joined the forerunner of DBO (the Department of Corporations) in 1989 … NASCUS Chairman Mary Ellen O’Neill presented on “training and retaining supervisory staff” at the International Credit Union Regulators’ Network (ICURN) Annual Conference  this week in Vancouver, B.C. Joining O’Neill – who is the Director of the Connecticut Banking Department’s financial institution division – was NASCUS President and CEO Lucy Ito, who briefed the group on the U.S. credit union system … The comments-due date on CFPB’s “request for information” about the small business lending market has been extended to Sept. 14 (from July 12).

NASCUS Summary: Request for Information Regarding the Small Business Lending Market


Information Contact:
Patrick Keefe, NASCUS Communications, pkeefe@nascus.org or (703) 528-5974

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