May 13, ’16 NASCUS Report

New NCUA Chairman takes aim at examination process

A review of the NCUA examination process – including the frequency of exams – is being initiated by new NCUA Board Chairman Rick Metsger, as outlined in his first speech this week as agency leader. And state regulators and credit unions welcome the news, NASCUS President and CEO Lucy Ito said, especially with the aim of eliminating the annual exam requirement for well-managed credit unions. Metsger, in remarks to the Idaho Credit Union League Thursday, said his priority at the agency is on “continual quality improvement” to meet the agency’s statutory responsibility to examine credit unions for safety and soundness with “as small a footprint as possible.” “To begin this process, we must first remove the requirement that every federal credit union, and all federally insured, state-chartered credit unions with more than $250 million in assets, be examined each calendar year. This prescriptive requirement creates a logjam of exams at the end of each year, which is neither effective nor efficient,” Metsger said, according to a release from the agency. The NCUA Chairman told the group that his goal is to make the change from the calendar-year requirement within the next two months, and to consider additional improvements through the creation of an “internal working group,” similar to that which developed the agency’s proposed field-of-membership rule.

“The calendar year requirement is a burden on both credit unions and state regulators,” said NASCUS President and CEO Lucy Ito in a statement. “We applaud that fix and we also welcome Chairman Metsger’s plans to review – and, hopefully, make a change– to the required frequency of exams by the federal agency.” She also noted that the annual exam requirement places the credit union system at a competitive disadvantage relative to the community bank system (for which the threshold is now $1 billion versus $250 million for credit unions), and urged the chairman to include state regulators in any working group he appoints, as state regulators have firsthand insight into the relative risk posed by similarly sized credit unions and community banks. Separately, the NASCUS leader noted the association has advocated for the changes.


NCUA release on Metsger review of exam process

Lucy Ito statement about Metsger’s remarks


NCUA Board Member J. Mark McWatters’ nomination to be a member of the board of the Export-Import Bank of the U.S. is essentially “off the table,” according to one report circulating in Washington this week. The Credit Union Times reported that Senate Banking Committee Chairman Richard Shelby (R-Ala.), said this week he wouldn’t move on the nomination “under any circumstances,” adding that the senator said he is fundamentally opposed to the idea of the Export-Import Bank. The publication also reported that the Banking Committee chairman further said that the Senate passed legislation reauthorizing the bank without his committee’s approval, and that it could do the same with the McWatters nomination. McWatters himself has said in the past that he is pleased to be a member of the NCUA Board, and that he would be happy to remain at the regulatory agency.


CU Times: McWatters Ex-Im Bank move off the table: Shelby


A briefing on 5300 Call Report modernization – which has been linked by NCUA to the implementation of its new risk-based capital rule – is on the agenda for NCUA Board Chairman Rick Metsger’s first meeting of the now two-person board next week (Thursday). With the retirement of former Chairman Debbie Matz April 30, Metsger and Board Member McWatters are the remaining duo. Last fall, when the NCUA Board adopted the RBC rule (which doesn’t go into effect until Jan. 1, 2019), the agency also said it would be working to “revamp” the Call Report, to get underway early this year and to include adding data items necessary to compute the risk-based capital ratio. At that time, the agency said it was aiming to complete the Call Report changes by the end of 2017, with an aim at looking at the “whole call report,” primarily at reorganizing it – not necessarily adding data, and quite possibly dropping some.


NCUA Board agenda, May 19


FinCEN’s final rule on “customer due diligence” under the Bank Secrecy Act was published this week and is now in effect. The final CDD rule, the Treasury Department stated in a release last week (May 5), adds 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.” Treasury stated that the final rule also amends existing Bank Secrecy Act (BSA) regulations to clarify and strengthen obligations of these entities. “With respect to the new requirement to obtain beneficial ownership information, financial institutions will have to identify and verify the identity of any individual who owns 25% or more of a legal entity, and an individual who controls the legal entity,” Treasury stated. The agency added that, based on comments about the proposal published in August 2014, the final rule extends the proposed implementation period from one to two years, expands the list of exemptions, and makes use of a standardized beneficial ownership form optional as long as a financial institution collects the required information. The CDD rule will be one of the many topics related to BSA that will be addressed at the NASCUS/CUNA BSA Conference Nov. 13-16 in San Antonio.


Final Rule from the May 11 Federal Register

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

NASCUS Aug. ’14 summary of proposed rule

NASCUS/CUNA 2016 BSA Conference, Nov. 13-16


More co-sponsors have signed on to support two pieces of legislation of interest to the state credit union system – on marijuana business access to banking services and NCUA budget transparency – although time is running out for action in this Congress on the measures. Two additional co-sponsors have been added in the last two weeks to the Marijuana Businesses Access to Banking Act (H.R. 2076, authored by Rep. Ed Perlmutter (D-Colo.)) – which would help clear up the regulatory ambiguity for credit unions and other financials in serving legal state marijuana businesses and their affiliates. The new co-sponsors – the only to sign on so far this year – are Reps. John K. Delaney, D-Md. (who signed on April 29), and Raul M. Grijalva, D-Ariz. (May 11). There are now 32 Democrats and three Republicans on the bill. Meanwhile, the NCUA Budget Transparency Act (H.R. 2287), sponsored by Rep. Mick Mulvaney (R-S.C.), has added five new co-sponsors since the beginning of the year, most recently in March. They are: Reps. Jeff Duncan (R-S.C., Jan. 5); Richard Hudson (R-N.C., Feb. 25); and Mark Meadows (R-N.C.), David B. McKinley (R-W.V.), and Bobby L. Rush (D-Ill.), all on March 7. Mulvaney’s bill now has 26 Republican and six Democratic co-sponsors. The measure requires the NCUA Board to open its budget process – including the OTR — to notice (with publication in the Federal Register) and comment  from stakeholders and the public. However, there are 47 work days (that is, days with votes) scheduled in the House remaining through October (with no work days scheduled for August and October), and only 16 days after the elections in November.


Congratulations to Edward “Joe” Face, commissioner of financial institutions for the Virginia State Corporation Commission’s Bureau of Financial Institutions, who has been named to the State Liaison Committee of the Federal Financial Institutions Examination Council (FFIEC). His two-year term on the SLC started May 1, and runs through April 30, 2018. Joe joins NASCUS appointee on the committee Mary Hughes, financial institutions bureau chief of the Idaho Department of Finance. Joe has been commissioner of the Virginia bureau since 1997; he joined the agency in 1979.


FFIEC press release/Joe Face named to FFIEC’s SLC

BRIEFLY: State system profile survey out; pair named to audit committee

Senior credit union regulators around the country received this week their invitations to participate in NASCUS’ biannual State System Profile for 2016, a comprehensive census of the state credit union regulatory environment. Responses are due by June 30, and results and analysis are expected to completed by this fall. Both will be shared with NASCUS members as a benefit of membership. For questions about the Profile, contact NASCUS’ Brian Knight at [email protected] (about the survey itself), or Pat Keefe at [email protected] (about the web-based survey instrument or reporting) … welcome to new NASCUS audit committee members Cynthia Stuart (deputy commissioner of the Vermont Department of Financial Regulation) and Scott Burgess (CEO of Rivermark Community CU in Beaverton, Oregon).

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

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