March 11, ’16 NASCUS Report

Matz to step down; Ito notes her service

Providing leadership during the financial crisis, taking the initiative on the overhead transfer rate methodology and engaging with the state credit union system were all items retiring NCUA Board Chairman Debbie Matz was commended and thanked for by NASCUS President and CEO Lucy Ito. Matz, who has served as NCUA Board chairman since 2009, announced her retirement from the agency – effective April 30 – this week.  Overall, Matz served a total of 11 years at NCUA, the only NCUA Board member to be confirmed by the U.S. Senate for a second term.  She was the eighth NCUA Board chairman. In a statement, Matz noted pride in “all that NCUA has accomplished to bring stability, advance growth and promote flexibility in our nation’s credit unions.” In particular, she pointed to the stressful financial situation of credit unions when she became chairman nearly seven years ago.

NASCUS President and CEO Lucy Ito, in a statement, acknowledged the chairman’s efforts to stabilize the credit union system, as well as to take action on the overhead transfer rate and engage with the state credit union system. “She voluntarily opened up the overhead transfer rate to public notice and comment, representing an historic step and adding to her long-held desire to bring greater transparency to the agency,” Ito said. “Overall, the state system appreciates Chairman Matz’ willingness over the years to engage with state supervisory authorities on regulatory innovations and to exchange best practices with her state agency counterparts.”


NCUA press release on Matz retirement

Ito statement on Matz retirement 


With the chairman announcing her April 30 retirement, and with the nomination of Board Member J. Mark McWatters to the board of the Export-Import Bank of the U.S., membership of the NCUA Board could, theoretically in the near future, be down to just one member: Vice Chairman Rick Metsger (whose term expires in August, 2017). That is, unless the White House takes action in the near future. The Federal Credit Union Act states that “In appointing the members of the Board, the President shall designate the Chairman,“ adding that “not more than two members of the Board shall be members of the same political party.” For now, credit union eyes will be on the White House for some indication of who will sit in the chairman’s seat (especially since the FCUA also states that “the management of the Administration shall be vested in the Board”), as well as for any replacements for either (or both) Chairman Matz or, if the Senate takes confirmation action, for Board Member McWatters. The president could designate one of the sitting board members as chair, or nominate a new appointee to the board and designate that nominee as chairman.


While she may have announced her intention to step down at April’s end, NCUA’s Matz clearly remains engaged, as she exhibited in letters this week to members of Congress about 18-month exam cycles. In response to House members who had written her in February urging the agency to turn to the longer cycle, Matz stated that NCUA will not consider an 18-month cycle for healthy credit unions until the end of 2017, citing the need to have in place “new processes and procedures” to deal with “many initiatives” now underway to improve the exam process. Matz said she recognizes potential advantages (including devotion of more resources to improved exams, focus on smaller institutions and budget savings). “However, given the amount of regulatory improvements occurring and extensive examination systems work that must be completed first, it is best to prioritize building out the improved systems and processes, and finalizing and incorporating the various regulatory relief measures instead of implementing an extended examination cycle during the current year,” she wrote. NASCUS President Lucy Ito noted that state agencies — motivated to control state examination costs — are, by and large, supportive of a longer exam cycle for well-managed credit unions.  In addition, she said, the FCU Act directs NCUA to rely on state examinations to the maximum extent feasible.


Chairman Matz letter in response to House members on 18-month exam cycle


About three-quarters of the members of U.S. House – 330 members and growing — from both sides of the aisle have signed on to a letter urging the CFPB to use its authority under the Dodd-Frank Act to exempt credit unions from certain rulemakings. (Under Section 1022(b)(3)(a) of the Act, the bureau’s director has the power to exempt “any class” of entity from its rulemakings.) The letter, originally circulated by Reps. Steve Stivers, R-Ohio, and Adam Schiff, D-Calif., notes that a Government Accountability Office report recently found that financial services have been limited or discontinued by many community-based financial institutions due to new regulations, particularly those governing remittance transfers.


In two unrelated developments over the last week, cybersecurity at financial institutions has drawn the interest of President Obama and a member of the Senate Banking Committee. Meeting Monday with federal financial institution regulators (including NCUA’s Matz), President Obama cited cybersecurity as an area of potential vulnerability with regard to “shadow banks,” or financial businesses that move into traditionally bank-dominated businesses, but which lack equal, rigorous regulatory oversight. Meanwhile, late last week, Sen. Dean Heller, R-Nevada, urged in a letter to the chairs of the Financial Stability Oversight Council (FSOC) and Federal Financial Institutions Examination Council (FFIEC) that they ensure a “consistent cybersecurity examination approach that does not waste precious time or valuable resources” and that could “better be used in the ongoing defense against cybercriminals.” Heller, a member of the Banking Committee, requested that FSOC and FFIEC provide a detailed response to his letter, including steps and plans the groups can take to increase cybersecurity exam coordination. NASCUS and CUNA sponsor the annual Cybersecurity Symposium, scheduled this year for Aug. 1-2 in Chicago. The symposium – now in its third year – features participation by state credit union regulators, federal regulators including NCUA, and review of tools offered by the FFIEC (such as the FFIEC’s cybersecurity assessment tool) to address cybersecurity at credit unions.


NASCUS/CUNA 2016 Cybersecurity Symposium


State-chartered credit unions – both federally and privately insured – now hold nearly 50% of all credit union assets, according to numbers collected by NASCUS from NCUA and American Share Insurance, Inc., (ASI), private share insurance provider to 124 state-chartered credit unions. The state credit unions held 48.5% of all assets – or $591.2 billion — among the nation’s 6,145 credit unions at year-end 2015. That’s up from 47.5% at the same time a year before among the state-chartered institutions. Assets among all SCUs in 2015 grew by 9.5%, with loans up by 12.4% By comparison, assets at federal credit unions in 2015 grew by 5.5% and loans advanced by 8.4%. “The state credit union system is increasingly meeting American consumers’ financial service needs,” said NASCUS’ Ito. “The system’s growth and development is fostered by innovative regulation at the state level while preserving safety and soundness.”

BRIEFLY: Gonzales to SLC; MBL School on tap; National Meeting Monday

Congratulations to Tennessee Department of Financial Institutions Commissioner Greg Gonzales who has been appointed to the State Liaison Committee (SLC) of the FFIEC, the interagency body for federal and state financial regulators, including NCUA and state credit union supervisory authorities. NASCUS’ Lucy Ito said Gonzales is a strong proponent of the state supervisory system—for both state banks and state credit unions, and the association is pleased he will be working with NASCUS’ SLC appointee Mary Hughes (Idaho) and other SLC members … NASCUS is hosting a two-day MBL School June 7-8 in New Orleans that will shine a bright light on NCUA’s forthcoming “principles-based” approach to business lending regulation for both credit unions and examiners alike; cost is $699 … Monday kicks off the NASCUS 2016 National Meeting at Washington Harbor in the nation’s capital; 58 senior credit union regulators from across the nation are gathering for the “regulators only” session through Tuesday …


NASCUS MBL School, June 7-8


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

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