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CUNA Focus on Regulatory Relief at NCUA Chairman Meeting

The Credit Union National Association (CUNA) Executive Committee met with National Credit Union Administration (NCUA) Board Chairman Debbie Matz to discuss matters of concern for credit unions on March 12. Items discussed include NCUA’s efforts to update Prompt Corrective Action (PCA), focusing on risk-based requirements. NCUA’s review of PCA is in response to the January 2012 GAO study of the National Credit Union Administration’s handling of problem credit unions. NCUA has a staff working group and is meeting with state regulators regarding this issue. NCUA is considering ways to enhance risk based net worth provisions. CUNA’s Examination and Supervision Subcommittee is developing recommendations in this area and plans to meet with NCUA’s Larry Fazio in early May.

CUNA CEO Bill Cheney raised the issue of pursuing authority for supplementary capital as part of PCA reform and reinforced CUNA’s interest in working with NCUA. Enterprise risk management and what it means for examiners and credit unions was also discussed. NCUA is preparing a supervisory letter to examiners on this and will be sharing the letter with credit unions.

Authority for credit unions to invest in simple derivatives to manage interest rate risks was strongly supported by the CUNA officials. A proposal is expected by this summer. CUNA will continue to urge the agency to move this project along so that the rule will be in place in sufficient time to authorize credit unions’ use of derivatives before interest rates begin to advance. The final rule will likely authorize such activities for a small group of credit unions that can demonstrate they have the ability to manage risks associated with these investments.

NCUA Board Chairman Matz reiterated her support for derivative authority as a means to help address rising interest rates. Agency staff stated that interest rate risk is NCUA’s biggest forward facing risk. On issues such as the measurement of IRR, where there can be legitimate disagreements between credit unions and their examiners, Debbie Matz said the agency is urging credit unions to talk with their Supervisory Examiner.

The issue of the continuing management of the Corporate Stabilization Fund was raised and CUNA urged the agency to provide more information to credit unions. An update on the losses of the corporate credit unions and remaining costs of the Stabilization Fund is expected shortly from Black Rock. CUNA will continue to press NCUA for more information and provide its own analysis to credit unions on the management of the Fund.

Examination issues and concerns were raised and CUNA will be following up with NCUA on the findings of its recent examination survey. 

The meeting also focused on how practical problems associated with applying due diligence requirements, regardless of the level of risk, can stymie innovation,( including as they relate to CUSOs). CUNA will be following up with NCUA’s Larry Fazio on this matter.

Chairman Matz emphasized that “NCUA can’t hold credit unions back when there aren’t safety and soundness issues.”