Diversity, accountability, and safety and soundness of financial institutions during the coronavirus crisis will be topics when federal financial institution regulators – including NCUA Board Chairman Rodney Hood — appear before the House Financial Services Committee Nov. 12, the committee chairman announced Tuesday.

In a press release, committee Chairwoman Maxine Waters said the hearing would be a virtual one – that is, all committee members and witnesses participate remotely with no in-person participation in the hearing room.

Past such hearings – including one held Dec. 4, 2019 by the committee – featured Hood, FDIC Chairman Jelena McWilliams, Federal Board Vice Chair for Supervision Randal Quarles, and (now former) Comptroller of the Currency Joseph M. Otting. Otting resigned his office in late May; he was replaced by Brian P. Brooks as acting comptroller.

The hearing is scheduled to get underway at noon ET.

LINK:
Chairwoman Waters Announces November Hearing Schedule

There is more to Tuesday’s national election than who or which party controls the White House and Congress – there are also questions, in four states, as to whether marijuana can be legalized for personal use, and in two others about legalizing marijuana for medical use.

NASCUS – since at least 2014 — was among the first organizations representing state regulators, credit unions or financial institutions to call for clarity in federal law regarding financial institutions’ ability to serve legal marijuana businesses. The federal government continues to classify marijuana, also known as cannabis, as an illegal controlled substance, which complicates the ability of credit unions to serve legal marijuana-related businesses within their states.

Nevertheless, states continue to consider legalization for personal or medical use. Voters in Arizona, Montana, New Jersey and South Dakota have statewide ballot measures asking voters to legalize marijuana for personal use. More specifically, by state, the measures would:

In Arizona: legalize possession and use of marijuana for persons who are at least 21 years old, enact a tax on marijuana sales, and require the state to develop rules to regulate marijuana businesses.

In Montana: amend the state constitution to allow for the legislature or a citizen initiative to establish a minimum legal age for the possession, use, and purchase of marijuana, similar to the regulation of alcohol under the state constitution.

In New Jersey: legalize the possession and use of marijuana for persons age 21 and older and legalize the cultivation, processing, and sale of retail marijuana.

In South Dakota: legalize the recreational use of marijuana and require the state legislature to pass laws providing for the use of medical marijuana and the sale of hemp by April 1, 2022.

Meanwhile, in addition to the South Dakota effort, medical marijuana use is up for consideration in Mississippi too – but with a much more complicated procedure. Two versions of a medical marijuana amendment are under consideration in the Magnolia State, one advanced by citizens (but subject to state legislature consideration), and the other advanced by the state legislature. The former measure is known as a “indirect initiated constitutional amendment.” The latter is the alternative developed by the state legislature after its consideration.

Thus, voters have choices: They may select “either measure” or “neither.” If they select the latter, they can move on in their voting – or select one of the medical marijuana versions just in case the “eithers” outpoll the “neithers.”

On the other hand, if a voter selects “either” at the start of this process, the voter must then answer the second question: that is, “which one?”

The “indirect” version (advanced by citizens) would allow medical marijuana treatment for more than 20 specified qualifying conditions, allow individuals to possess up to 2.5 ounces of marijuana at one time, and tax marijuana sales at the current state sales tax rate of 7%.

The state legislature’s version would restrict smoking marijuana to terminally ill patients; require pharmaceutical-grade marijuana products and treatment oversight by licensed physicians, nurses, and pharmacists; and leave tax rates, possession limits, and certain other details to be set by the legislature.

To date, 44 states and the District of Columbia have legalized marijuana use and possession for either recreation or medical use (11 for recreational, 33 and D.C. legalizing or decriminalizing medical marijuana).

Credit unions, their relationships with regulators, leadership during a national pandemic, and teambuilding are all discussed during a podcast NASCUS President and CEO Lucy Ito recorded with news aggregator CUInsight, and which debuted this week. During the 36-minute audio report, Ito also discusses strategies for credit unions to consider to remain competitive and the changing regulatory environment. To hear the podcast, see the link below.

LINK:
CUInsight.com podcast: Lucy Ito – Organizational interest (Oct. 26)

Credit unions and banks in New York have been advised by their state regulator to integrate financial risks from climate change into their governance, risk-management and business strategy frameworks, reportedly the first time a state supervisory agency for financial institutions has taken that approach.

In a release this week, the New York State Department of Financial Services said the guidance follows similar direction given to state-regulated insurers. This week’s action, the agency indicated, would ensure that all of its regulated entities are managing climate risks.

State Superintendent of Financial Services Linda A. Lacewell, in the release, asserted that climate change is happening now, and steps must be taken to manage financial risks. “For example, regulated organizations should designate a board member, a committee of the board (or an equivalent function), as well as a senior management function, as accountable for the organization’s assessment and management of the financial risks from climate change,” the agency said in its release. “This should include an enterprise-wide risk assessment to evaluate climate change and its impacts on risk factors, such as credit risk, market risk, liquidity risk, operational risk, reputational risk, and strategy risk.”

The letter was advisory only; it outlined no supervisory actions to be taken by the agency.

LINK:
Letter from NY DFS: climate change and financial risks

A new partnership – CU Campus 365 — developed between NASCUS and the Bank Administration Institute (BAI) and which offers affordable, customizable on-line compliance and education for credit unions, was announced this week by NASCUS.

Under CU Campus 365 — credit union members of NASCUS have access to education and compliance training anytime, anywhere, on affordable terms. CU Campus 365 is offered through the digital resources of BAI, a non-profit, prominent provider of research, training, and leadership programs for credit unions, banks and other financial institutions of all sizes.

“With the onset of the coronavirus crisis, the resulting limitations on travel to training and educational events, it is imperative that credit unions have access to additional learning options and affordable and personalized education in an engaging online classroom format,” said NASCUS President and CEO Lucy Ito. “NASCUS will continue its highly respected and well-attended education and training events, but CU Campus 365 will deliver even more educational opportunities to the credit union system, and will complement the offerings of NASCUS’ in-person education events.”

A highlight of CU Campus 365 is that credit union training administrators can deploy customized training to their staff on a wide variety of subjects and disciplines. That includes choosing from a library of hundreds of courses ranging from lending laws and regulations to BSA/AML laws and regulations. Credit union staff will also be able to access training from a professional skills library that will cover coursework from effective leadership to social media marketing through CU Campus 365.

A proposed rule aimed at clarifying and codifying the role of supervisory guidance from federal financial institution regulators was adopted by NCUA this week, joining the federal banking agencies and CFPB in issuing the proposal for comment.

Voting unanimously during a rare second meeting in a month, the NCUA Board joined the banking agencies in issuing (for a 60-day comment period) the proposal on the role of supervisory guidance issued by the agencies. Under the proposal, the meaning of “supervisory guidance” would be clarified as meaning, essentially, it doesn’t have the force of law.

If finalized, the proposal would codify an interagency statement issued by all of the agencies in September 2018. That statement was intended to make clear that, unlike a statute or regulation, supervisory guidance is not the same as statute or regulation. “Supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance,” the 2018 statement read.

A petition brought by banking industry trade groups in 2018 called on the federal banking agencies and CFPB to go further than a statement in clarifying the role of supervisory guidance. The bank groups specifically urged the agencies to make clear that matters requiring attention, matters requiring immediate attention and other such supervisory actions may only be based on a violation of statute or regulation, and not on a failure to comply with supervisory guidance.

NCUA was not a target of the 2018 petition. However, because the agency joined in the 2018 statement, it had to be involved in the considerations for a proposed rule as required by federal regulatory procedure, according to agency staff.

The FDIC Board issued the proposal for comment last week at a meeting of its board. The CFPB and the OCC followed that action and joined the proposal (both of those agencies’ leaders also sit on the FDIC Board). The Federal Reserve has also jumped on the proposal after its board gave the green light.

That left NCUA as the only agency (as of Wednesday) whose leadership had not yet agreed to join the proposed rule, but that had signed the 2018 statement. It was not for a lack of effort. The agency had planned to consider the proposal at its Oct. 15, but pulled the measure off the agenda just as the meeting began. The reason, according to agency staff: it had not yet received word that the other four regulators had completed any revisions to the proposal.

As Scott Neat, associate director of the agency’s office of examination and insurance, told the board this week: the agencies strive to work closely together on joint rulemaking and to issue their proposals at the same time – but it doesn’t always work out that way. “Timing is seldom simultaneous,” Neat said.

However, he also told the board, to ensure that NCUA can “remain timely in its formal approval process of this proposed rule,” the agency convened the board meeting Wednesday to consider it. Typically, the NCUA Board meets only once a month.

In other comments, staff told the NCUA Board members that the proposal will not create a burden for credit unions. That’s at least partially because, they said, the agency has followed the intent of proposal for at least the last seven years. Staff pointed out that NCUA has, at least since 2013, tied all “documents of resolution” for credit unions to specific statutory and regulatory citations – a practice, the agency staff (and board members) vowed would not change under the proposed rule.

LINK:
Proposed Interagency Rule, Part 791, Role of Supervisory Guidance

 

The NASCUS Michigan Examiner School gets underway on Thursday (Nov. 5) in a virtual setting. The three-hour session features sessions on fraud (with Rayleen Pirnie, Director Risk and Fraud, New England Automated Clearinghouse (NEACH); cannabis and hemp (with Deirdra O’Gorman, Founder & Principal, DX Consulting); and compliance (with Glory LeDu, CEO, League InfoSight, Inc.). See the link below for registration details … Also on the NASCUS education calendar in the upcoming weeks: the Tennessee Directors’ College (another virtual event), Dec. 1 from 9 a.m. to noon CT (10 a.m.-1 p.m. ET) … Complaints about student loans were down about 33% for the year ending Aug. 31, the CFPB said this week – but the agency declined to pinpoint a single factor for the drop, which continued a trend starting in 2017. Among the causes it did point out: relief provided under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which the bureau said likely contributed “significantly” to the decrease since March 20, but that didn’t account for the steady decline in complaints before that …In case you somehow forgot or weren’t paying attention (both unlikely): there’s an election on Tuesday. If you haven’t already (via mail for early in-person voting), remember to cast your ballot at your local polling place!

LINKS:
NASCUS MI Examiner School Nov. 5 (registration and agenda)

NASCUS Dec. 1 TN Direcctors’ College

Annual Report of the CFPB Private Education Loan Ombudsman 2020