CHOICE, Treasury review up next week?
With Congress returning next week, anticipation is high that financial regulatory reform legislation in the House – containing several provisions of interest to the state credit union system — will come up for a vote on the floor. Also perhaps emerging next week: The Treasury secretary’s recommendations for overhauling the federal financial regulatory system, which could have an impact on the future of the CHOICE bill. The Financial CHOICE Act, H.R. 10, would make sweeping changes to the federal financial regulatory system, many aimed at dismantling the 2010 Dodd-Frank law, passed in the wake of the Great Recession. Provisions of interest to state credit unions include those providing more transparency in the NCUA budgeting process (including through public hearings), and for the overhead transfer rate (OTR), and a so-called “off-ramp” provision allowing financial institutions, including credit unions, which maintain an average leverage ratio of at least 10%, the option to be exempt from federal capital and liquidity requirements. Another provision would subject NCUA to the congressional appropriations process for funding; the agency is outside of that process now.
An event that could have an impact on the CHOICE Act’s future is a review of the Dodd-Frank law by Treasury Secretary Steven Mnuchin’s, which is due right about now. The review was mandated by an executive order signed by President Donald Trump Feb. 3 that called for a report within a 120-day period (which concludes today). The review may – or may not – be in concert with the goals of the CHOICE legislation, particularly since the order includes six “core principles” for regulating the U.S. financial system. The sixth principle in the list calls for “restoring public accountability” within federal financial regulatory agencies and “rationalizing the federal financial regulatory framework.” But the order provides no more guidance about what either of those terms mean. The other five principles are:
- empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;
- prevent taxpayer-funded bailouts;
- foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry;
- enable American companies to be competitive with foreign firms in domestic and foreign markets;
- advance American interests in international financial regulatory negotiations and meetings.
‘HISTORY OF OTR’ UPDATED, SHOWS FISCUS STILL PAY MORE
We are still keeping a close eye on the Overhead Transfer Rate (OTR), and its future in partially funding the activities of NCUA – exhibited by our publication this week of an update to our “History of the OTR.” The history illustrates that in 2017, for the first time in nine years, NCUA noticeably reduced the OTR. However, the history also shows how, over the period of 2013-17, federally insured, state-chartered credit unions (FISCUs) contributed $31.3 million more to cover NCUA expenses, while FCUs saw their contributions rise by $24.5 million (and saw their operating fees rise by $2.1 million). During that same period, NCUA expenses rose by $56.4 million.
NASCUS applauds the NCUA board for opening the OTR to a special comment process initiated more than a year ago in January 2016. As we await completion of the review process and NCUA’s recommendations, our position remains the same: that the agency should provide transparent and understandable details of its methodology and rationale to stakeholders (FISCUs and FCUs, alikethat are directly affected by the OTR, and that the agency submit its OTR methodology to the notice and comment process on a continuing basis. By way of background (for those just looking into the issue): The OTR is the percentage of annual expenses that the NCUA Board uses to determine the amount it will take from the National Credit Union Share Insurance Fund (NCUSIF) to cover the NCUA’s annual “insurance-related” expenses.
AGENCIES ‘HIGHLIGHT’ TECHNIQUES TO DEAL WITH APPRAISER SHORTAGE
Two options to assist in timely consideration of loan applications by lenders in the face of limited availability of state-certified and licensed appraisers were highlighted this week in a joint advisory issued by federal financial regulatory agencies, largely in response to comments made to them by insured financial institutions. The agencies (NCUA, the Federal Reserve, the FDIC and the OCC) stated in a press release that they are highlighting two areas in which appraiser availability may be addressed:
- Temporary practice permits: allows appraisers credentialed in one state to provide their services on a temporary basis in another state experiencing a shortage of appraisers, subject to state law. The advisory also discusses reciprocity, in which one state allows appraisers that are certified or licensed in another state to obtain certification or licensing without having to meet all of the state’s certification or licensing standards.
- Temporary waivers: sets aside requirements relating to the certification or licensing of individuals to perform appraisals under Title XI of FIRREA in states or geographic political subdivisions where certain conditions are met. Temporary waivers may be granted when it is determined that there is a scarcity of state-certified or -licensed appraisers leading to significant delays in obtaining an appraisal.
The release stated that the advisory is in response to comments received through the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) review process. Financial industry representatives, in their EGRPRA comments, raised concerns regarding the timeliness of appraisals, which they attributed to shortfalls in the availability of state-certified and -licensed appraisers, especially in rural areas. Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) requires appraisals for federally related transactions to be performed by individuals who meet certain state-certification or -licensing requirements.
UPDATED CAT PUBLISHED, WITH MORE RESPONSE OPTIONS
Additional cybersecurity response options — which would allow financial institutions to include supplementary or complementary behaviors, practices and processes that represent current practices in support of their cybersecurity activity assessments – are outlined in an update to the Cybersecurity Assessment Tool (CAT) released this week. The update to the CAT by the Federal Financial Institutions Examination Council (FFIEC), on behalf of its members, also addresses changes to its IT Exam Handbook. According to the Exam Council, the changes provide a revised mapping in Appendix A to the updated Information Security and Management booklets.
According to an FFIEC release, the CAT was developed to help financial institution management determine the institution’s risk profile, inherent risks and cybersecurity preparedness. The CAT, the release states, “provides a repeatable and measurable process that financial institution management may use to measure cybersecurity preparedness over time.” Use of the tool is voluntary, FFIEC stated; financial institution management may choose to use the CAT or another framework, or another risk assessment process, to identify inherent risk and cybersecurity preparedness.
CYBERSECURITY SYMPOSIUM ’17 KICKS OFF NEXT WEEK
Just in time for the release of the new CAT from the FFIEC: the NASCUS-CUNA 2017 Cybersecurity Symposium begins next week in San Diego for an intense, two-day run. Featuring more than 14 hours of dialog, presentation and discussion, and nearly 20 expert speakers — including keynoter Jim Stickley of Stickley on Security, host Randy Romes of CliftonLarsonAllen, and NCUA Board Member Rick Metsger — discussing the latest challenges and solutions in cybersecurity, the program sets the standard for cutting-edge cybersecurity programs. Watch the NASCUS website and Twitter feeds next week for updates – as well as coverage next Friday in NASCUS Report.
CFPB RELEASES PLAN TO ASSESS ABILITY TO REPAY/QM RULES
A plan to assess the effectiveness of the Ability-to-Repay/Qualified Mortgage rule (ATR/QM rule) has been released by the CFPB, with a 60-day comment period emphasizing requests from the public for sources of data, and generally to provide information that would help with the assessment. In a blog posting, the bureau stated that it is conducting the assessment as an opportunity to “advance our knowledge of the benefits and costs of the key requirements of the ATR/QM rule. The assessment will also provide the public with information on the mortgage lending market, and help us to fulfill our commitment to be an evidence-based and effective agency.”
AROUND THE STATES: New regulator takes seat in Iowa
Kate Averill is the new superintendent of Iowa credit unions effective this week, an appointment announced late last week by the office of Iowa Gov. Kim Reynolds (R). Averill, formerly senior vice president at Citizens Community Credit Union in Fort Dodge, succeeds Joann Johnson, who has retired. Averill’s appointment must still be confirmed by the Iowa state senate when it convenes again in January. According to a release from the governor’s office, Averill served as director of marketing and later as vice president of marketing and business development before becoming senior vice president at the credit union. In 2015, then-Gov. Terry Branstad (R) appointed her to the Early Childhood State Board, which is charged with creating a comprehensive vision for early childhood care, education and health care, according to the release. In 2004, Averill established Stamp of Support, which collected donations to pay for sending packages to members of the military serving overseas, according to the release.
BRIEFLY: Summit discounts extended one week
Good news for those of you still on the fence about attending the NASCUS State System Summit Aug. 29-Sept. in San Diego: You can come down on the side of signing up, now that discounts on registrations have been extended to June 9 (that’s one week away). Members save up to $200 on registration fees; non-members up to $300. The four-day Summit, the only national event devoted to the state credit union system, features presentations and dialog about the key issues facing the state-chartered credit unions, including fintech, the future of FOM, the outlook for the corporate system, and much more. See the link below for details.
Patrick Keefe, NASCUS Communications, firstname.lastname@example.org or (703) 528-5974
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