June 8, 2022 – The U.S. Senate voted to confirm Todd M. Harper’s reappointment to the National Credit Union Administration (NCUA) Board until April 10, 2027.
The U.S. Senate voted to confirm Todd M. Harper’s reappointment to the National Credit Union Administration (NCUA) Board until April 10, 2027.
Before joining the NCUA Board, Mr. Harper served as director of the agency’s Office of Public and Congressional Affairs and chief policy advisor to former Chairmen Debbie Matz and Rick Metsger. He is the first member of the NCUA’s staff to become an NCUA Board Member and Chairman.
“On behalf of the National Association of State Credit Union Supervisors (NASCUS) and its stakeholders, I would like to congratulate Chairman Todd Harper on his full-term confirmation on the NCUA Board,” commented NASCUS President & CEO Brian Knight. “We look forward to furthering our productive discussions on the many issues facing the credit union system with Chairman Harper, Vice-Chair Hauptman, and Board Member Hood. We appreciate their continued positive dialogue with state regulators to find solutions that benefit both state and federal charters.”
As NCUA Board Chairman, Mr. Harper serves as a voting member of the Financial Stability Oversight Council and represents the NCUA on the Federal Financial Institutions Examination Council and the Financial and Banking Information Infrastructure Committee.
“In the years ahead, my focus will remain on credit union members, the system’s resiliency and strength, and the NCUA’s readiness to respond to an evolving economic environment, credit union system, and financial services marketplace. Consistent with the law, I will also continue prioritizing capital and liquidity, cybersecurity, consumer financial protection, and diversity, equity, and inclusion,” stated Harper.
During his tenure as staff and legislative director with the U.S. House of Representatives, he contributed to impactful financial services reforms, from the enactment of the Gramm-Leach-Bliley Financial Services Modernization Act in 1999 through the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010.
“It is an honor to continue working with my fellow NCUA Board members — Kyle Hauptman and Rodney Hood — and the dedicated team of professionals at the NCUA,” added Chairman Harper.
(Feb. 4, 2022) FDIC Board Chairman Jelena McWilliams is scheduled to step down today (Friday, Feb. 4), following through on the announcement she made late last month.
In her resignation letter submitted to the White House on New Year’s Eve, McWilliams gave no indication why she was resigning, three-and-a-half years into her five-year term (she was nominated by President Donald Trump [R] in December 2017 and confirmed by the Senate in late May 2018).
Since then, the White House has been silent about who will succeed McWilliams, either as a permanent chairman of the agency’s board or as an acting chairman to take over after she leaves today. The only member of the agency’s board who was appointed (and confirmed by the Senate) specifically to serve on the panel is Board Member (and former chairman) Martin Gruenberg, a Democratic appointee. He is serving in a “holdover” capacity since his term expired in December 2018. Unless he resigns, he may remain on the board until a successor is confirmed by the Senate.
Meanwhile, McWilliams received a note of acknowledgement from her regulatory colleagues at NCUA with a joint statement signed by all three board members.
NCUA Chairman Todd M. Harper said he had “seen firsthand the expert knowledge, considerable skill, and strategic insights she provides in issues and making decisions.” Vice Chairman Kyle Hauptman said McWilliams is “an inspiring example of the American dream, an immigrant from a statist regime who then achieved here at the highest levels.” Board Member Hood said she “played a pivotal role in creating an effective regulatory environment for the U.S. banking system.”
LINK:
NCUA’s Harper, Hauptman, and Hood Commend Chairman McWilliams for Her Service to the FDIC
(Jan. 28, 2022) A vote by the full Senate is the next stop on the journey of the nomination of Todd Harper to be confirmed for another term on the NCUA Board as chairman. No date has been yet set for a vote.
The Senate Banking Committee voted 17-7 last week to recommend Harper’s confirmation to the full Senate. It was one of 12 votes that the committee took last week on nominations by President Joe Biden (D)
Harper joined the NCUA Board in 2019 to fill an unexpired term and was designated chairman in January 2021 by Biden, succeeding Rodney Hood (R). If confirmed, Harper would have a board term that continues through April 10, 2027. The current term of Vice Chairman Kyle Hauptman ends in August 2025; the current term of Board Member Rodney Hood in August 2023.
The Federal Credit Union Act generally provides that NCUA Board members may not be appointed to succeed themselves, but the act also notes that someone appointed to fill an unexpired term may be reappointed for a full six-year term.
As NCUA Board chairman, Harper serves on and is now also the chair of the FFIEC.
LINK:
Senate Banking and Housing Committee Votes on Key Biden Administration Nominees
(Jan. 7, 2022) The nomination of Todd M. Harper to be reappointed chairman of the NCUA Board, for a six-year term to run through April 2027, was resubmitted by the White House to the Senate this week – even though Harper in September testified in a confirmation hearing before the Banking Committee.
The resubmission of Harper’s nomination was one of three for federal financial regulators made by the White House this week (and more than 100 submitted overall). The other two were for Federal Reserve Board Chair Jerome H. (“Jay”) Powell and Board Member Lael Brainard. The White House had originally submitted those nominations Dec. 13. Powell has been nominated to be reappointed chair of the board (for a four-year term ending in 2026; Brainard has been nominated to be vice chair of the board, also for term ending in 2026.
The reasons for the resubmittals is largely procedural. Jan. 3 marked the beginning of the second session of the current Congress. Under Senate rules, nominations not confirmed by the end of a legislative session must be returned to the White House and resubmitted. New confirmation hearings for those already conducted (such as Harper’s) are unlikely.
Meanwhile, confirmation hearings for Powell and Brainard for their leadership posts on the Fed Board were announced this week by the Senate Banking Committee. Powell’s hearing will be Tuesday (Jan. 11) and Brainard’s Thursday (Jan. 13).
LINK:
Nominations Sent to the Senate
(Oct. 15, 2021) Finalizing a proposed – and contentious — rule on expanded lending and services provided by federal credit union (FCU) credit union service organizations (CUSOs) highlights the scheduled agenda for next week’s meeting of the NCUA Board.
In other action, the board will consider finalizing a rule that would add an “S” (Sensitivity to Market Risk) component to the existing CAMEL rating system and redefine the “L” (Liquidity Risk) component, thus updating the rating system from CAMEL to CAMELS.
The CUSO rule was proposed at the beginning of the year. It would deem as permissible for CUSOs the origination of any type of loan that an FCU may originate; and grant the NCUA Board additional flexibility to approve permissible CUSO activities and services. The agency also sought comments on broadening FCUs’ authority to invest in CUSOs.
But, from the beginning, the proposal has been controversial. It was released Jan. 14 on a 2-1 vote of the NCUA Board, with then-Board Member (now Chairman) Todd Harper dissenting. Harper, making his objection, noted the NCUA’s lack of direct supervisory authority over CUSOs and indicated the proposal raised potential consumer protection concerns. He said such a rule “will create a Wild West within the credit union space,” affording “little accountability for consumer protection” as CUSOs could exceed the restrictions applied to FCU lending in areas such as interest rate, loan term, and repayment.
Shortly after that board meeting, Harper was named chairman of the three-member board by the newly inaugurated President Joe Biden (D). He replaced current Board Member Rodney Hood in the position.
Since then, the proposal stalled. It was originally issued with a March 29 comment deadline (about 60 days after its proposal). The agency then extended the comment period another 30 days.
Last month, the board agreed to consider finalizing the rule (along with two other outstanding proposals) in upcoming board meetings over three months; the CUSO rule was the first on the list. However, controversy again dogged the proposed CUSO rule, as it (and the other two rules, to be considered in November and December) were approved for future, final consideration on a vote of 2-1, with Harper again dissenting. In doing so, he reiterated his concerns about the potential of the proposed CUSO rule for growing an “already unregulated space within the credit union system, with little accountability for protecting consumers and credit unions.”
In its comment filed on the proposal (on April 30), NASCUS noted as a key concern with the proposal that possible, additional reporting requirements for state credit unions could be a result of a finalized rule. NASCUS noted that the proposal could influence state credit unions considering collaborating with FCU investors in the formation and ownership of a CUSO, — which prompted the association to comment.
In some states, NASCUS pointed out, CUSOs owned by state credit unions already hold expanded lending power. The association noted, however, that the NCUA proposal could end up requiring additional reporting requirements that don’t today exist for SCUs. “NASCUS opposes extension of any additional reporting requirements to SCU CUSOs resulting from an expansion of FCU powers,” the association wrote.
The CAMELS proposal was put forth in January (the same meeting at which the CUSO proposal was issued) and was approved for public comment on a unanimous vote by the board. The proposal would bring the NCUA’s rating system up to date with a change that banking regulators incorporated decades ago and satisfy a recommendation the agency’s inspector general has been recommending for about the past five years.
Nearly five years ago, NASCUS wrote to NCUA urging the change and adding the “S” component. “NASCUS and state supervisory agencies encourage NCUA to consider earlier adoption of ‘CAMELS,’” NASCUS’ Lucy Ito wrote in the June 2016 letter to the board. “We again note that the separation of the ‘S’ component does not require a credit union to develop additional management system enhancements where market risk is already appropriately identified, measured, monitored and managed as part of the ‘L’ component.”
She also noted that in states that have adopted CAMELS (now totaling 24 – up from 16 when she wrote the letter), that regulators and credit unions have reported positive outcomes with nearly no additional regulatory burden.
In its comment letter filed last spring, NASCUS wrote that moving expeditiously on adding a “market risk sensitivity” component to the credit union examination system – that is, adding an “S” to “CAMEL” – would better align NCUA with state credit union and federal banking regulators that have already made the move. However, NASCUS added, there is no need to “reinvent the wheel and develop a credit union CAMELS Rating System that diverges from the established CAMELS system currently in use in bank supervision and in the states that have adopted CAMELS for credit union supervision.” NCUA has proposed definitions and components of the criteria to be used in assigning the “S” and “L” ratings.
Also on the agenda for Thursday’s meeting is a board briefing on cybersecurity. The NCUA Board meeting is scheduled to get underway at 10 a.m., and to be live-streamed via the Internet.
LINKS:
Board Agenda for the October 21, 2021 Meeting
NASCUS comment: Notice of Proposed Rulemaking Regarding CAMELS Rating System
NASCUS comment: Proposed Rule, Credit Union Service Organizations (CUSOs) – RIN 3133–AE95
(Oct. 1, 2021) While not outright supporting the idea of an expanded NCUA Board membership, the chairman of the current board noted that there are some upsides to the idea during testimony Thursday at a Senate confirmation hearing.
NASCUS and the state system have long called for an expansion of NCUA Board from its current three members to five – and for requiring that at least one member of the board have state credit union regulator experience.
At the hearing, during questions to him from Sen. Steve Daines (R-Mont.) at the Senate Banking Committee hearing on NCUA Board Chairman Todd Harper’s nomination to a full term on the NCUA Board (and to continue as chairman), Harper acknowledged that there are two sides to expanding the membership of the NCUA Board.
“Certainly a disadvantage of going to a larger board would be higher costs for that board and perhaps slowing down the process,” Harper said. “On the flip side of that, though, it would create more voices at the table in order to have more informed decision making.”
Harper also noted “that state regulators have long called for an increase in the size of the NCUA board.” He also pointed out that, adding more members to the board could change a structural defect that limits communications among board members.
“The sunshine act rules make it difficult for me to talk one-on-one with my fellow board members because when you have a three-member board, two people talking together is a majority and you have to notice that,” he said, referring to publication of board meetings for public review in the Federal Register. “A larger board would facilitate the board-member-to-board-member interaction.”
Daines seemed to be open to the idea of an expanded board, saying he appreciated Harper’s view. He said “looking at the reality” of how many members the agency board has had since its 1979 inception (22), and a four-year run of having only two board members during the last decade, “there’s an argument for considering making the board larger.”
Any change in the size of the NCUA Board would require a change in the Federal Credit Union Act; there is currently no legislation before Congress calling for that.
Harper was nominated last month by President Joe Biden (D) to a term on the NCUA Board ending in 2027; the White House has indicated Harper will continue as chairman. Harper’s nomination is somewhat a first among NCUA Board members as he is essentially succeeding himself (he is now serving in a “holdover” status as the term he was serving officially ended in April).
Harper was one of three nominees to appear on a panel before the Banking Committee hearing Thursday; the other two are nominees to the Export-Import Bank (Exim Bank) of the United States. (They are: Judith DelZoppo Pryor as first vice president, and Owen Edward Herrnstadt as a member of the bank’s board.)
All three were repeatedly congratulated by senators from both parties on their nominations; none publicly voiced opposition to any of their nominations.
(Oct. 1, 2021) Other key moments of the Harper nomination hearing included:
- Harper again endorsed third-party vendor exam authority for NCUA (which would require a statutory change). “Bank regulators have authority to go into third-party vendors; NCUA does not,” Harper said in response to questions from Sen. Jon Ossoff (D-Ga.). Harper, as he has before, called lack of that authority “a blind spot” for NCUA. He told the senator NCUA is working on a white paper on the subject that Harper will provide to Ossoff if confirmed. (NASCUS supports the agency obtaining the power over technology service providers (TSPs) that provide services to federally insured credit unions — provided that any such authority requires NCUA to rely on state examinations of such service providers where such authority exists at the state level.)
- The NCUA Board chairman indicated to Sen. Tina Brown (D-Minn.) that credit unions in all communities – large and small, urban and rural – should be cognizant of risks presented by climate change. He said NCUA must consider storms and all material risks that occur as a result of climate change, including such risks as credit unions attached to a particular industry that is facing structure changes due to climate change, or credit unions in areas of high concentration of agricultural areas where crops are affected by climate change.
- A commitment by Harper for “more specialized training” of examiners working in agricultural areas to assess risks particular to those areas, in response to comments by Sen. Kevin Cramer (R-N.D.). “One of the complaints I hear from credit unions in ag lending is ‘our [NCUA] examiners, they don’t know the particular crop; they don’t know how this farm works.’ That is something certainly I would commit to you, if confirmed, to working with you to make sure that we get more specialized training for our examiners and help in our exams in that way.”
- On repeated questions about his views of a proposal that credit unions and banks report to IRS the deposits and withdrawals made by members to determine their tax liability, Harper repeatedly answered that, while he was aware of the proposal, he hadn’t looked at it in detail and indicated he couldn’t render an opinion on it. He did say there would be administrative costs – but wouldn’t characterize how big (or small) those would be. He asked if he could get back to the panel members who inquired about it after he’s had more time to study the proposal, which has been roundly criticized by credit union industry trade groups.
(Sept. 24, 2021) Earlier in the meeting, the NCUA Board voted – 2-1, with Harper the “no” vote – to act on three outstanding proposed rules over the span of the final three months of the year. Under the board’s vote, an expanded list of permissible activities and services of CUSOs would be considered for final action at the board’s Oct. 21 meeting
Action on two other outstanding proposals – on FOM shared service facility requirements, and mortgage servicing – were also scheduled for action at upcoming board meetings (Nov. 18 and Dec. 16, respectively). All three rules have been awaiting final action since this spring, following the close of their comment periods.
The CUSO proposal would allow the origination by a service organization of any type of loan that a federal credit union may originate, and grant the NCUA Board additional flexibility to approve permissible CUSO activities and services. In the comment request, the agency also sought comments on broadening federal credit unions’ authority to invest in CUSOs.
The proposal was issued by the NCUA Board Jan. 14, also on a vote of 2-1, with then-Board Member Harper dissenting (he became chairman later that month). Harper, making his objection, noted the NCUA’s lack of direct supervisory authority over CUSOs and indicated the proposal raised potential consumer protection concerns.
He essentially repeated those objections at Thursday’s meeting, calling the proposal the “wrong rule at the wrong time.” He asserted that the rule is not related to COVID-19 pandemic relief, and more likely to cause harm to small credit unions rather than help them. “It will grow an already unregulated space within the credit union system with little accountability to consumers and credit unions,” Harper said.
He also reiterated a call (which he has made before Congress) for NCUA to have oversight authority of CUSOs and other third-party vendors.
Regarding the FOM shared service facility requirements and mortgage servicing proposals, the NCUA chairman voiced continued opposition to both, but also aired some optimism about “a path forward” for each.
Under the FOM shared service facility requirements, any federal credit union shared branch, ATM, or electronic facility would meet the definition of “service facility” for membership requirements in multiple-common-bond FCU that participates in a shared branching network, thus expanding membership reach of federal credit unions. Under the mortgage servicing proposal, the agency’s investment regulation would be amended to permit FCUs to purchase mortgage servicing rights from other federally insured credit unions subject to certain conditions.
Those two proposals were issued for comment in December, on a vote of 2-1 for both with Harper dissenting on both.
Thursday’s action on the three proposals was advanced jointly by Vice Chairman Kyle Hauptman and Board Member Rodney Hood. They presented a joint memo to the board for approval that set the meeting dates, specifically meant to force action on the three outstanding proposals. “The items put forth by this Board Action Memorandum shall be brought before the Board as final rules in the timeframe set by this action. Nothing in this action should be construed to alter NCUA’s obligations under the Government in the Sunshine Act,” their memo stated.
LINK:
Board action memorandum: Action on NCUA Board Agenda Items for 2021
(Aug. 6, 2021) Congress should give NCUA authority to examine (and enforce actions) over third party vendors, NCUA Board Chairman Todd Harper said in testimony to the Senate Banking Committee this week. He also urged Congress to make several improvements to the National Credit Union Share Insurance Fund (NCUSIF).
In May, Harper made similar requests before the House Financial Services Committee.
On exam authority, Harper asked Congress to give his agency exam and enforcement oversight of third-party vendors, including credit union service organizations (CUSOs). Calling the lack of authority a “regulatory blind spot,” Harper asserted that NCUA should have comparable authority as other federal financial institution regulators already have.
“While there are many advantages to using these service providers, the concentration of credit union services within CUSOs and third-party vendors presents safety and soundness and compliance risk for the credit union industry,” Harper told the committee.
He said the top five credit union core processor vendors provide services to approximately 87% of total assets held by credit unions. Additionally, he said, the top five CUSOs provide services to nearly 96% of total credit union system assets.
“A failure of even one of these vendors represents a significant potential risk to the (National Credit Union) Share Insurance Fund and the potential for losses from these organizations are not hypothetical,” Harper asserted. “Between 2008 and 2015, CUSOs contributed to more than $300 million in losses to the Share Insurance Fund alone.”
The NCUA Board chairman told the committee that the continued transfer of operations from credit unions to CUSOs and other third parties diminished the agency’s ability to “accurately assess all the risks present in the credit union system and determine if current CUSO or third-party vendor risk-mitigation strategies are adequate.”
NASCUS supports the agency obtaining the power over technology service providers (TSPs) that provide services to federally insured credit unions — provided that any such authority requires NCUA to rely on state examinations of such service providers where such authority exists at the state level. Further, NASCUS supports efforts to strengthen state regulatory exam and supervision of third parties providing services to state-chartered credit unions.
Regarding the insurance fund, Harper made three legislative requests to the committee:
- Increase the fund’s capacity by removing the 1.50% statutory ceiling on its capitalization;
- Remove the limitation on assessing premiums when the equity ratio exceeds 1.30% of equity in the fund to insured shares, giving the NCUA Board discretion on the assessment of premiums;
- Institute a risk-based premium system.
LINK:
(July 30, 2021) NCUA gets a chance to share its views with the Senate next week when Board Chairman Todd Harper is scheduled to testify before the body’s Banking Committee. He will be joined for the Tuesday (Aug. 3) hearing on a panel by federal banking regulators, including FDIC Chairman Jelena McWilliams and Acting Comptroller of the Currency Michael J. Hsu. According to the committee’s website, the title of the hearing is “Oversight of Regulators: Does our Financial System Work for Everyone?” Sen. Sherrod Brown (D-Ohio) chairs the Senate Banking Committee. The hearing is scheduled to get underway at 10 a.m., and will be live-streamed via the Internet.
LINK:
(July 23, 2021) Federally insured credit unions with $500 million or more in assets could avoid risk-based capital (RBC) requirements and opt-in to a new measure of capital adequacy if they meet a minimum net worth standard and other qualifying criteria, under a proposal issued by the NCUA Board Thursday.
Called the Complex Credit Union Leverage Ratio (CCULR, and dubbed “cooler” by members of the board), the proposal would allow the $500 million and more credit unions to opt in to the new capital standard if they also hold a minimum net worth ratio of 9% as of Jan. 1 of next year (which will be gradually increased to 10% two years later).
Other qualifying criteria include: off-balance sheet exposures held by the credit union must be 25% or less of total assets; trading assets and trading liabilities must be 5% or less of total assets; and goodwill and other intangibles must be 2% or less of total assets.
“A complex credit union that opts into the CCULR framework would not be required to calculate a risk-based capital (RBC) ratio under the Oct. 29, 2015, risk-based capital final rule” as amended in October, 2018, the proposal’s summary states. “A qualifying complex credit union that opts into the CCULR framework and that maintains the minimum net worth ratio would be considered to be well capitalized.”
Issued on a unanimous vote by the board, the proposal would make other changes to the RBC rule, according to the summary, including addressing asset securitizations issued by credit unions, clarifying the treatment of off-balance sheet exposures, deducting certain mortgage servicing assets from a complex credit union’s risk-based capital numerator, updating several derivative-related definitions, and clarifying the definition of a consumer loan.
As both NCUA staff and board members noted during the meeting, the proposal is similar to the community bank leverage ratio (CBLR) adopted by the federal banking agencies for banks and which became effective in 2020. That rule removes requirements for calculating and reporting risk-based capital ratios for most banks with less than $10 billion in assets that hold more than 9% in risk-based capital, and that meet certain risk-based qualifying criteria. Banks meeting the criteria can “opt-in” to use the CBLR.
The NCUA proposal was issued with a 60-day comment period, which means it would end sometime in either late September or early October. That doesn’t give NCUA much time to consider whatever comments it receives before finalizing a rule that will, in effect, directly affect the risk-based capital (RBC) rule set to take effect on Jan. 1.
During discussion, NCUA Board Chairman Todd Harper called the proposal a prudent course of action. “This proposal is an appropriate measure that provides complex credit unions with a streamlined approach to managing their capital levels while also strengthening the system’s resiliency to economic shocks,” he said.
He said year-end 2020 call report data indicate that nearly 75% of complex credit unions would meet the 9% net worth requirement under the proposal. He also asserted that the proposal would increase the capital buffer of insured complex credit unions, by $22 billion (to an estimated $104.6 billion) , if all of the credit unions “opted in” to the rule. (The increase in capital is compared to the total amount if the RBC rule were in effect, Harper noted.)
Board Vice Chairman Kyle Hauptman said the chief benefit of the proposal is that it allows some credit unions to bypass the risk-based capital approach. “For me, the point of this simpler leverage ratio is that it protects both credit unions and the (National Credit Union) Share Insurance Fund from the inevitable problems of risk weighting,” he said.
Although Board Member Rodney Hood said he would “begrudgingly” vote for the proposal (which he did), he took the opportunity before the vote to call for an end to the RBC rule. He said he wants the board to either table the RBC rule or rescind it, noting that it would be eight years old when it fully takes effect. “RBC should be a tool and not a rule,” he said.
LINK:
Notice of Proposed Rulemaking, Parts 702 and 703, Complex Credit Union Leverage Ratio
(June 4, 2021) An increase in appropriations in 2022 for NCUA’s Community Development Revolving Loan Fund (CDRLF) was requested this week by agency Board Chairman Todd Harper in NCUA’s annual report to Congress on the fund’s 2020 activities.
Harper, however, sought no specific amount of dollar increases. However, in the report, he noted that the CDRLF was able to fund just about half of the $7.6 million in total requests for technical assistance grants and loans from low-income-designated credit unions last year,
To bolster his request, the NCUA chairman in the report noted that NCUA last year devoted nearly all of the fund’s efforts to help credit unions and their members meet the significant challenges posed by the COVID-19 pandemic. “Because demand regularly exceeds the amount of available funds for these grants, and because low-income credit unions are more likely to serve communities disproportionately impacted by COVID-19, I urge Congress to increase appropriations for CDRLF grants in 2022,” Harper stated. “With more funding, the agency could increase the number of credit unions receiving grants and increase the size of the grants it makes, deepening the program’s impact in underserved communities.”
Congress created the CDRLF to stimulate economic development in low-income communities served by credit unions; all appropriations go to eligible credit unions. The fund is administered by the NCUA.
LINK:
NCUA: CDRLF Funds Have Positive Impact on Communities, Credit Unions