July 29, ’16 NASCUS Report

Does new exec pay proposal affect all CUs?
NASCUS letter seeks clarification

Seeking clarification on whether a proposed NCUA rule on incentive-based compensation plans applies to all credit unions – including privately insured – and recommending that the agency consult with state supervisory authorities are two, key points made in NASCUS’ comment letter about the proposal this week. NASCUS was commenting on a proposed rule NCUA issued in April on incentive-based compensation plans at credit unions. The rule is mandated for all federal financial institution regulatory agencies by the Dodd-Frank Act; the NCUA proposal is the credit union portion of the regulation.

However, NCUA’s proposal appears, NASCUS wrote, to affect all credit unions (including privately insured ones), not just federally insured CUs – and the agency must be clear on whether it covers non-federally insured credit unions. “The provisions referenced in the proposed rule may be fairly read to define the scope of the rule to include any credit union, regardless of whether it is federally insured,” NASCUS wrote. “We do not believe this was NCUA’s intent,” the association stated, adding that the agency should amend the provision to explicitly clarify that the rules “only apply to federally insured credit unions.” On the other hand, if it is the agency’s intent to include non-federally insured credit unions, NCUA should include provisions codifying consultation with the prudential state regulator, NASCUS wrote.

The NASCUS letter also urged the agency to work with state regulators in addressing the framework of a three-tiered system for applying the regulation to covered financial institutions: $250 billion or greater in assets (Level 1), $50 billion up to $250 billion in assets (Level 2), and $1 billion up to $50 billion in assets (Level 3). Only one credit union is above the $50 billion threshold, and (at the time the rule was proposed) 257 federally insured credit unions were within the Level 3 category. The proposal has rigorous requirements for financial institutions in Levels 1 and 2, and gives NCUA discretion to apply those rigorous standards to Level 3 credit unions. However, NASCUS pointed out that little in the proposed regulation establishes a framework that would allow a Level 3 credit union to understand the parameters of what might trigger application of the more advanced rules. NASCUS made two recommendations in this area: that the agency include in its procedures consultation with a state regulator in the case of a federally insured, state-chartered credit union, and; an opportunity for the credit union to rebut NCUA’s initial determination that discretionary rules should be applied. “Given the subjective nature of the (Level 3) determination, and lack of concrete parameters, consultation with the state regulator will be essential in ensuring a balanced and informed decision,” NASCUS wrote.


NASCUS comments on proposed rule, incentive-based compensation plans


With all of the controversy this week in the U.S. presidential contest about email hacking — as well as release this week of President Obama’s “United States Cyber Incident Coordination” policy directive — what better moment could there be for holding the credit union system’s leading conference on cyber security? In fact, when the third annual NASCUS/CUNA Cybersecurity Symposium kicks off Monday in Chicago, nearly 130 regulators, credit union leaders and cyber security experts will be in the right place, at the right time to discuss the latest developments in cyber security, and how their organizations can respond to them. The two-day program features 13 hours of presentations, discussions, demonstrations and panel/group discussions focusing on cutting-edge techniques, best practices and procedures that protect organizations from the latest threats. Among the key sessions: Understanding the laws protecting members’ information; choosing the right cybersecurity risk assessment tool; cybersecurity, anti-money laundering, and identity theft red flags; rightsizing the cybersecurity budget; and, using the cloud. See the links below for the list of speakers at this year’s event, as well as a list of attendees. And – watch our Twitter feed (@TheNASCUS) Monday and Tuesday for live updates and reports from the daily sessions.


Cybersecurity Symposium agenda 

Cybersecurity Symposium speakers list 

Cybersecurity Symposium attendees list 

Policy directive: United States Cyber Incident Coordination


CFPB will complete a plan to measure the effects of its new mortgage servicing rules on credit unions and community banks that includes specific metrics, baselines, and analytical methods to be used, the Government Accountability Office (GAO) stated this week in a report. In its investigation of the bureau’s mortgage rules, GAO uncovered an unclear picture. On the one hand, GAO found that community banks and credit unions remain active in servicing mortgage loans under CFPB’s new rules – even though many lenders told the congressional watchdog agency that changes in mortgage-related requirements resulted in increased costs, such as hiring staff and updating systems. But those costs have not deterred the lenders from staying in the business: GAO noted that many lenders “also stated that servicing mortgages remained important to them for the revenue it can generate and their customer-focused business model.” GAO also found that credit union and banking regulators’ new capital rules have changed how mortgage servicing rights (MSR) are treated in calculations of required capital amounts. However, at the same time, GAO stated it found that the new rules appear “unlikely to affect most community lenders’ decisions to retain or sell MSRs.” GAO concluded that CFPB’s plans for retrospectively reviewing its mortgage-servicing rules for any impact on financial institutions are incomplete – and thus recommended that CFPB develop a metric-based plan to collect better information about the impact of the rules on the lenders. CFPB, GAO reported, has agreed to “take steps to complete its plan for conducting a retrospective review of the mortgage servicing rules and refine the review’s scope and focus.”


GAO report: CFPB Needs More Complete Plans for Reviewing Rules


Evaluating risks posed by potential customers for money laundering or terrorist financing are the target of new rules being considered by the Committee on Payments and Market Infrastructures (CPMI), a group hosted by the Bank for International Settlements and made up of central bankers from around the world, including the Federal Reserve Board and the New York Fed. The group said recently, Reuters reported, that its efforts are spurred by lenders, who want greater clarity on how to comply with mandatory anti-money-laundering checks of customers. The aim, according to the news story, is to create “know-your-customer” utilities, or data bases, that would obtain information on customers from across the banking sector for use by all banks — saving time and money by avoiding many checks on the same customer. The group said that it would ask the International Organization for Standardisation to “define the basic set of information that all such utilities would collect and that all banks have to be ready to provide to other banks.”

Additionally, CPMI has published five recommendations to address fragmentation in so-called correspondent banking. Tougher rules to stop money-laundering and other illegal activities have prompted banks to cut links to each other and reduce the cost of stringent checks on who is using their systems, according to the news story. This has led to “fragmentation” of the global financial system, excluding people (or countries) from benefits of cross-border payments, Reuters reported.


Five recommendations to ease correspondent banking costs and concerns


Two new associate directors for NCUA’s Regions II and V have been announced by NCUA Executive Director Mark Treichel, with both new associates holding veteran service with the agency. Michael Ryan is the new associate director in Region II, effective Sunday; he previously served as the region’s director of supervision. He succeeds Wendy Angus, who became Region II associate regional director of programs in May. Ryan joined the agency 29 years ago. Linda Thompson is the new associate director in Region V, and will take on the new role Aug. 8. Previously, she was director of special actions. She succeeds Cherie Freed, who was named Region V Director in April. Thompson joined the agency in 1988.


Lucy Ito Summit invite videoSunday (July 31) is the cutoff date for registration savings on the 2016 NASCUS State System Summit, Oct. 5-7 in Chicago. You can still register after that date – but you won’t save at least $100 on registration for the event, which includes more than 21 hours of general sessions, group discussions and networking. See the link below to sign up now before the July 31 deadline.


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

BRIEFLY: Bureau rolls out debt collection rule proposals

An outline of proposals aimed at overhauling the debt collection market by capping collector contact attempts and by helping to ensure that companies collect the correct debt was released by the CFPB Thursday. According to the bureau, the proposals require debt collectors to have more and better information about the debt before they collect. And, as they are collecting, debt collectors would be required (among other things) to limit communications, clearly disclose debt details, and make it easier to dispute the debt.


Outline of debt collection proposals under consideration

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

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