July 22, ’16 NASCUS Report

NCUA envisions collaboration with states,
end of calendar-year exams

Collaboration with state regulatory agencies, and the end of a calendar-year exam requirement for federally insured credit unions, are two outcomes of the adoption of a 2017-21 strategic plan by the NCUA Board during its regular monthly meeting this week. The new strategic plan lists under two objectives (“Ensure a Safe and Sound Credit Union System” and “Promote Consumer Protection and Financial Literacy”) the strategy of collaborating with “federal regulatory agencies and state regulators as appropriate to maintain a safe and sound regulatory environment” and to protect consumers using credit union products and services.

NASCUS President and CEO Lucy Ito said the state system has been working with the federal agency to adopt a more collaborative approach to state agencies, and looks forward to the working relationship. “As we all know, when the federal and state systems work together, credit unions and consumers benefit – and the credit union system overall — thrives.”

Additionally, with the adoption of the strategic plan, the board effectively “retired” a performance goal of requiring exams each calendar year of all FISCUs with more than $250 million in assets, and every federal credit union. But NCUA Board Chairman Rick Metsger, in commenting on the change, underscored that it does not extend the exam cycle (to 18 months, for example). “How and whether we further change the exam cycle will be determined by the Board after we have received recommendations from the Exam Flexibility Initiative,” Metsger said. In May, Metsger established an internal NCUA working group (“the Exam Flexibility Initiative”) to obtain stakeholder feedback and evaluate the agency’s examination and supervision program. A group of five state regulators are providing input to the group The Board expects to receive recommendations from the working group in September.


NCUA strategic plan, 2017-21

NCUA Exam Flexibility Initiative

Press release on Exam Flex Initiative


In other action, the board heard results of a mid-year budget review, in which NCUA CFO Rendell Jones reported that no reduction in the FCU operating fee rate is recommended (at least at this time) for 2017. However, later in his comments, Jones noted that, rather than make an adjustment to the future operating fee now, staff will review cash needs and make a final determination later in the year. (NASCUS will monitor any subsequent adjustments to the operating fee with respect to appropriate adjustments to the overhead transfer rate.) Jones estimated that the agency projects to spend $2.7 million less than it budgeted for 2016. The board also reviewed the second quarter National Credit Union Share Insurance Fund results – which show the equity ratio of the fund at 1.24% (estimated to rise to 1.27% after adjusted 1% deposits are collected in October). The agency noted, however, that “the ratio may differ if loss patterns change.” The board Q&A discussion clarified that the decline in fund equity is primarily due to growth in insured shares and a continuing low interest rate environment, resulting in lower returns on fund holdings. Additionally, the results show the percentage of CAMEL code 4/5 shares to total insured shares rose in the second quarter from 0.78% vs. 0.85%. As of June 30, 11 federally insured credit unions had failed, 10 as a result of fraud. In all of 2015, 16 failed.


NCUSIF 2nd quarter 2016 report

NCUA 2016 mid-session budget review


In providing “best-in-class transparency on NCUA’s proposed budget” at its scheduled October budget briefing, the agency will “make available more and better budget information than other federal financial institutions regulators,” Board Chairman Rick Metsger wrote in a letter to a member of the Senate Banking Committee late last week. However, the board chairman also made one thing clear about the briefing: not everyone who participates “will get what they want, but they will get an opportunity to be heard.” In his response to an earlier letter from Sen. Dean Heller (R-Nevada), the NCUA Chairman said the budget briefing will be more comprehensive than those held previously by the agency. “For example, we will release information about the proposed budget before the briefing,” Metsger wrote. “In doing so, stakeholders will be able to review and analyze the information in advance of the briefing. This, in turn, will allow for a more meaningful discussion during the briefing.”

The NCUA Chairman also suggested that the budget briefing approach – “outside of a statutory mandate” – gives the agency greater flexibility in organizing future budget briefings. “NCUA also will be better able to respond to stakeholder concerns about the budget as they arise from year to year,” he wrote. At least one bill and one proposal are pending in Congress that would have an impact on the agency’s budget process. The Financial CHOICE Act, being formulated by House Financial Services Committee Chairman Jeb Hensarling (R-Texas) would subject the NCUA budget to the congressional appropriations process. Meanwhile, H.R. 5869 – introduced last week by Reps. Mick Mulvaney (R-S.C.) and Denny Heck (D-Wash.) – would require that NCUA publish a detailed analysis of how its expenses are assigned between prudential activities and insurance-related activities, and the extent to which those expenses are paid from FCU operating fees, or transferred from the National Credit Union Share Insurance Fund via the overhead transfer rate. A provision mirroring the Mulvaney-Heck bill is also contained in the CHOICE proposal.

Metsger letter on budget briefings to Sen. Dean Heller (R-Nevada)


“Frequently Asked Questions” (FAQs) to assist covered financial institutions in understanding the scope of the Customer Due Diligence (CDD) Requirements for Financial Institutions have been issued by the Financial Crimes Enforcement Network (FinCEN). The FAQs provide interpretive guidance with respect to the CDD rule and cover a variety of topics, including; purpose of the CDD rule; rule application; covered financial institutions; CDD requirements with respect to beneficial ownership; amendments to the anti-money laundering (“AML”) program requirements; definition of beneficial owner – and more.

The CDD rule, published May 11, added the requirement that financial institutions – including credit unions, banks, brokers or dealers in securities, mutual funds, futures commission merchants, and introducing brokers in commodities – “collect and verify the personal information of the real people (also known as beneficial owners) who own, control, and profit from companies when those companies open accounts.” In a May release, Treasury stated that the final rule also amends existing Bank Secrecy Act (BSA) regulations to clarify and strengthen obligations of these entities.


FinCEN FAQs on the CDD rule

NASCUS summary of final rule

Final Rule from the May 11 Federal Register

Treasury May 5 release on final rule (and other topics)


The current cyber threat landscape and developing common risk-based approaches among federal and state financial regulatory agencies to managing cybersecurity risk were on the agenda for discussion at the Tuesday meeting of the Financial and Banking Information Infrastructure Committee (FBIIC), attended by NASCUS leadership. The committee is chaired by the U.S. Treasury and consists of 18 member organizations from across the financial regulatory community, both federal and state. Those attending the Washington, D.C., session from NASCUS were Chairman Steve Pleger of the Georgia Department of Banking and Finance; Chairman-elect Mary Ellen O’Neill of the Connecticut Department of Banking; and NASCUS President and CEO Lucy Ito. Also attending Tuesday’s meeting was NCUA Board Chairman Rick Metsger. NASCUS and NCUA are the only credit union system representatives on the committee.

The group also discussed efforts to increase information sharing among FBIIC member agencies. Additionally, committee members were briefed on the results of recent cyber exercises, coordinated by FBIIC and Financial Stability Oversight Council (FSOC) member agency staff, which evaluated the impact of a cyber incident on financial stability.

Treasury press release: FBIIC June 19 meeting “readout”

2016 Cybersecurity Symposium/agenda, registration


Reaccreditation of the Kansas Department of Credit Unions was approved in June, the fourth such designation by NASCUS for the state department since the first in 1995. The KDCU supervises 67 state-chartered credit unions in Kansas, which together hold more than $5.1 billion in assets and count more than 800,000 members. Kansas is one of 26 state agencies nationwide that has earned NASCUS accreditation, which is valid for five years, and subject to annual review. The annual review process enables the accredited agency and the NASCUS Performance Standards Committee (PSC) to measure progress and improvement within each agency. To earn accreditation, an agency’s qualifications are evaluated by an Accreditation Review Team (ART), who completes a thorough examination of the agency’s accreditation application and supporting documents, followed by three days of intense on-site scrutiny of agency programs and performance.  Questions about NASCUS accreditation should be directed to Director of Accreditation and Examiner Programs Tammy Gentilini at [email protected] or by phone (703) 528-0811 – or see the link below for more information.

NASCUS accreditation program (including list of 26 states accredited)

NASCUS accredited states 2016


Lucy Ito Summit invite videoThe 2016 NASCUS State System Summit may still be about 10 weeks away (Oct. 5-7 in Chicago), but savings on registration come to an end in less than 10 days. July 31 is the cutoff for saving at least $100 on registrations for the Summit – which includes more than 21 hours of general sessions, group discussions and networking. Attending the 2016 Cybersecurity Symposium Aug. 1-2 in Chicago? Keep up the cyber-momentum you establish there by attending the Summit – which includes additional sessions on cybersecurity, including: Cybersecurity risk assessment and examination; Privacy and cybersecurity for credit unions; Payment systems. See the link below to sign up now before the July 31 deadline.(Click on the image, or here, to watch Lucy Ito’s invitation to attend the 2016 Summit)

2016 NASCUS State System Summit, Oct. 5-7; info and registration

BRIEFLY: ‘Credit Union Day’ in Buckeye land

The fifth annual “Ohio Credit Union Day” is coming up Aug. 29 in Columbus – a one-day event that has become a favorite among those in the Buckeye State. With sessions on cybersecurity, the new CECL accounting standard, national and state issues – and more – it’s total immersion into the key issues during the event, co-sponsored by NASCUS and the Ohio Division of Financial Institutions. See more below for complete program and registration information.

OH Credit Union Day/info and registration

Cybersecurity Symposium, Aug. 1-2

Information Contact:
Patrick Keefe, NASCUS Communications, [email protected] or (703) 528-5974

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