Oct. 28, ’16 NASCUS Report

NASCUS offers 3 key points
on transparency at budget briefing

Three key points about transparency of the NCUA budget that focused on the overhead transfer rate (OTR), separation internally of the examination and insurance functions, and the future structure of the NCUA Board were all addressed by NASCUS President and CEO Lucy Ito at the NCUA Board’s budget briefing Thursday. One of seven stakeholders sharing their views on the 2017-18 agency budgets, Ito urged the board members to provide greater transparency to the overhead transfer rate (OTR) and consider clearer separation between the agency’s chartering authority and insurance functions.

Regarding the OTR, she noted that greater transparency would be a big step to adopting a transfer rate “that is easier to understand and more equitable to both state and federal charters.” She also urged the board not to delegate its OTR implementation authority to NCUA staff. “The OTR is important. The credit union system deserves better than to have NCUA leadership delegate away its important responsibility of budgetary oversight and its fiduciary responsibility to the fund,” she said.

As for separating the functions of insurer and chartering authority, Ito noted that “today, there is a potential conflict of interest within the agency unless these functions are internally separated.” She said that if separated, credit unions would know exactly what costs are associated with running the chartering and prudential supervisory agency and what costs are associated with administration of the insurance fund.

She also advocated for a long-held goal of NASCUS: An expanded NCUA Board with one seat reserved for a member with state regulatory experience. Acknowledging that the changes would require an act of Congress, she said NASCUS made the suggestion at the briefing to underscore the benefits that could result. “We know that expanding the Board by two seats will have an impact on the agency’s budget,” she said. “We believe the benefits likely outweigh the added cost,” citing better communication among board members and generally enhancing the board’s deliberative process.


Lucy Ito written comments to NCUA Board budget briefing


Supplemental capital – and its use by credit unions – will be the subject of a likely January “advance notice of proposed rulemaking” by NCUA, but the issue itself won’t be without its challenges, including those related to tax implications, fraud prevention, investor suitability, disclosures and others. At the open, regular meeting of the NCUA Board Thursday, Chairman Rick Metsger noted that the ANPR that will come forth in January is “the first we’ve done” since he instituted his “board briefings” to discuss issues coming before the board. “We’ll move as expeditiously as possible,” Metsger said – then added there are issues to be considered, specifically referring to tax implications.

NASCUS’ Lucy Ito said the state system would work closely with NCUA in addressing the issues. “Supplemental capital is an important tool in enhancing credit union safety and soundness, and the state system must be part of the discussion to ensure that both federal and state credit unions have the opportunity to use this tool, and that neither be at a disadvantage. NASCUS has a long record of supporting this critical safety and soundness enhancement, and will continue to build that record.”


NCUA presentation, supplemental capital


In other action Thursday, the NCUA Board approved a new field of membership (FOM) rule for federal credit unions designed to “improve consumer access to affordable credit,” according to NCUA. Board Chairman Rick Metsger acknowledged during the meeting that “numerous states have updated their FOMs. Many of these were successfully updated years, even decades ago,” he said, referring to the states as the “petri dishes” of experimentation with successful (and safe and sound) FOM policies. The rule takes effect 60 days after publication in the Federal Register. The board also issued for comment a new proposed rule on FOM that incorporates a number of comments received on the FOM rule that was just finalized in order to “provide further field-of-membership community charter options for federal credit unions” (with a 30-day comment period).

The board also:

  • Officially renamed the NCUA’s consumer office as the “Office of Consumer Financial Protection and Access”
  • Adopted a final rule adjusting civil monetary penalties for inflation (required by Congress).
  • Approved an interagency proposed rule to implement private flood insurance requirements for loans in special flood hazard areas contained in a 2012 statute.


Final FOM rule

Proposed FOM rule

CMP final rule

Proposed interagency rule on private flood insurance


An updated, online “Examiner’s Guide” – featuring searchable content and updated guidance in the areas of interest rate risk, risk-focused exams, total analysis process and fidelity bond coverage – is ready for use. The guide was developed with input from state regulators, and its launch represents a shift to a searchable, database approach, as NCUA has stated it will discontinue print and pdf versions of the guide. Examiners are urged to familiarize themselves with the organization and functionality of the website, “as it will be the sole source of examiner guidance going forward,” NCUA stated. Additional updates will be released in phases, as the content is updated, reviewed, and approved, the agency stated. For example, the MBL chapter is expected to be finalized in the next few months. The guide was developed by NCUA working with the National Exam Committee. The committee gathered comments from examiners regarding the Examiner’s Guide, exam process, procedures, and emerging issues affecting exams. NASCUS State representatives on the NEC are Denise St. Pierre (NH), Dawn McCaskill (GA) and Edward Schutte (OR).


Online Examiner’s Guide website

Press release/NCUA Launches New Examiner’s Guide


Nine states reached double-digit market share of mortgage lending at year-end 2015, according to Home Mortgage Disclosure Act (HMDA) data recently released and analyzed by Callahan’s. Alaska topped the list with a 28.4% market share at the end of last year. Vermont, which stood at 24%, increased its market share the most over a year-to-year basis, according to Callahan’s, rising 3.4 points in the year. Vermont was second on the list of double-digit market share. The other seven states on the list are: Wisconsin (at 18.3%), Iowa (16.9%), Idaho (15.9%), Rhode Island (14.1%), Michigan (13.4%), Utah (10.8%) and New Hampshire (10.2%).


After nearly 40 years in public service, Washington State Department of Financial Institutions Director Scott Jarvis is retiring, effective Nov. 1. Gov. Jay Inslee has named Gloria Papiez as acting director of DFI. NASCUS’ Lucy Ito noted Jarvis’ many contributions over the years to Washington state CUs and the state CU system at large. Among them: leading the WA DFI to be among the top 10 state financial regulators; tirelessly advocating for states’ rights; providing a compelling example for state and federal regulators in striking the balance between protecting and educating the public and promoting economic vitality; monitoring negative impacts on state-chartered credit unions and local communities of federal policies and decision-making; keeping key elected officials (such as U.S. House Financial Services Committee Member Denny Heck, D-Wash.) apprised of the impact of those policies. “Our sincere thanks to Scott for his accomplishments and leadership of the state system,” she said.


NCUA’s new member business loan rule goes into effect in January, and NASCUS and the Credit Union Division of the Tennessee Department of Financial Institutions are setting the stage for credit union supervisors and practitioners to be ready for it. The Dec. 6-7 MBL School in Nashville is designed to give state stakeholders the latest opportunity to become intimately familiar with the rule and how it affects credit unions in their state. Among the sessions at the event: NCUA’s Commercial Lending Rule Point-by-Point; Interpreting Part 723: NCUA’s Guidance; Getting the Policies and Procedures Right; and Best Practices for Commercial Lending in the CUs Less than $250 million in Assets. The event – which includes a special introduction by Commissioner Greg Gonzales, Tennessee Department of Financial Institutions – takes place at the Tennessee Department of Financial Institutions in Nashville. See the link for more information, including costs, agenda – and to register.

Dec. 6-7 MBL School, Nashville

Fall calendar '16


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

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