CUNA Regulatory Advocacy Report

Editor’s note: The following regulatory advocacy report from CUNA was originally issued on February 7. You can read this week’s regulatory update in the Thursday, Feb. 17, edition of Anthem.

The issues we hear about the most regarding the NCUA relate to examiner practices, the agency’s budget, whether the agency is mitigating losses associated with the conserved corporate credit unions, and whether the NCUA is properly managing the Corporate Credit Union Stabilization Fund and containing costs that are borne by natural person federally insured credit unions.

Regarding examination issues, CUNA’s Examination and Supervision Subcommittee is following up on a number of concerns, such as overly aggressive examiners and the eagerness to employ sanctions. The Subcommittee will be meeting with the NCUA’s Director of Examination and Insurance Melinda Love and Deputy Executive Director Larry Fazio during the Subcommittee’s meeting at the CUNA Governmental Affairs conference.

We are continuing to get positive feedback on CUNA’s “Supervisory Issues and Examinations: Guidance for Credit unions During the Current Economic times and Beyond,” which was developed by CUNA’s Supervisory Issues Working Group, chaired by Ohio Credit union League President Paul Mercer. We sent you the link to the report recently and it is available on CUNA’s Regulatory Advocacy website. It was also featured in a cover article of the January 26 edition of the Credit Union Times.

Regarding NCUA’s efforts to mitigate losses, since the fall of the 2008 we have been pushing the NCUA to do all it can to minimize and spread out the assessments for credit unions. We have also recently addressed the pricing of NCUA Guaranteed Notes. CUNA staff have met with agency staff repeatedly on these matters and will continue to urge the agency to pursue this objective aggressively.

Questions have been raised about whether the NCUA is pursuing third parties, such as banks, brokers and credit rating agencies, that had a role in a corporate’s purchase of, or decision to purchase, problem securities. We cannot share the details of those discussions but we are aware that for a number of months, the NCUA has been conducting investigations regarding third parties and the extent of their liability for the corporates’ losses.

We anticipate further developments in the NCUA’s efforts over the course of the year. Pursuit of credit rating agencies may be the most problematic since they have been able to mount successful defenses in a number of lawsuits involving similar claims.

Concerning the agency’s budget and management of the Corporate Credit Union Stabilization Fund, we have raised a number of issues with the NCUA Board. Many of these concerns also fall within the scope of the CUNA Examination and Supervision Subcommittee, which will be reviewing them with NCUA at their meeting during GAC. CUNA staff are also preparing additional reports on these issues for that and other upcoming meetings in conjunction with CUNA’s GAC, and we will provide the reports later this month.

Finally, CUNA sent another letter to NCUA Board Chairman Matz to urge her to follow the President’s Executive Order regarding regulatory relief and to take steps to curtail the regulatory burdens for credit unions. A copy of that letter is below.

If you have any questions, please do not hesitate to contact Eric Richard at , Mary Dunn at or me at


January 24, 2010

The Honorable Debbie Matz
NCUA Board Chairman
1775 Duke Street
Alexandria, VA 22314-3428

Dear Chairman Matz:

On Tuesday, President Obama issued an Executive Order, “Improving Regulation and Regulatory Review.” The order is very timely and calls on executive branch agencies to look for ways to reduce the regulatory burdens on those they supervise and consider the use of incentives to achieve regulatory goals, among other regulatory reform objectives. I have written to the President to commend this action. Although the President may not be able to impose the order officially on independent agencies such as NCUA, I am following up on that correspondence with this message to urge NCUA to voluntarily apply the substance of the Executive Order to its own activities.

Over the years, efforts have been made by Congress and the agency to address credit unions’ regulatory burdens, including through the adoption and implementation of the Regulatory Flexibility Act, the Paperwork Reduction Act, Treasury and General Government Appropriations Act, Small Business Regulatory Enforcement Fairness Act and the Economic Growth and Regulatory Paperwork Reduction Act, all of which generally require NCUA to consider the impact of its rulemaking. Also, as reflected in NCUA’s Strategic Plan, the agency has established goals to “further develop a regulatory environment that is transparent and effective” and to “issue clearly articulated and easily understood regulations.” In addition, NCUA has a regulatory review process in place under which one- third of all agency rules are considered for changes each year. These are positive steps that we commend.

Yet, credit unions are still facing enormous and growing regulatory burdens, not just from NCUA but from the Federal Reserve Board and other agencies that write rules covering their operations. As of July 21, 2011, credit unions will also be subject to rules developed and implemented by the Consumer Financial Protection Bureau.

Much more needs to be done to help credit unions shoulder their regulatory responsibilities, and we would like to work with the agency on this endeavor. CUNA is currently reviewing the totality of credit unions’ regulatory burdens as well as identifying specific regulations that are problematic. We will be working closely with leagues and credit unions to ensure we do not miss any rules that should be improved and will be sharing our conclusions and recommendations with NCUA and other policymakers.

Meanwhile, we recommend that NCUA consider the following actions that would help create a more positive regulatory environment for credit unions, under which they would be able to serve their members even better:

  • Announce that pursuant to the Executive Order, NCUA is undertaking its own initiative under which it will review all its regulations with an eye toward mitigating their impact on all federal and/or federally insured credit unions wherever possible and that it will release its recommendations by early summer. Specific rules that should be considered for streamlining for well-run credit unions, while protecting safety and soundness, are lending and investment rules.
  • Undertake to help credit unions with less than $250 million in assets with their compliance responsibilities by identifying areas in which regulatory requirements for such credit unions could be further simplified; CUNA’s Small Credit Union Committee could be an important resource in this endeavor.
  • Work proactively with the Consumer Financial Protection Bureau to limit the negative impact of its regulations on credit unions to the greatest extent possible;
  • Develop a web page linked to NCUA’s home page devoted to regulatory relief and the activities NCUA is undertaking to review rules and relieve unnecessary burdens;
  • Consider ways that the Regulatory Flexibility Program could be expanded to provide additional incentives for well-managed credit unions;
  • Avoid over-regulating credit union volunteers;
  • Avoid regulating in order to eliminate risks presented by the current economic crisis, as opposed to allowing credit unions to manage those risks, consistent with legal requirements and safety and soundness;
  • Help diffuse the tension that is building within the credit union system regarding the examination process by adopting the recommendations contained in CUNA’s “Guidance for Credit Unions on Supervisory and Examination Issues;” and
  • Consider whether additional cuts in the agency’s 2011 budget could be made, in line with efforts in Congress and the Administration to contain or reduce their operating costs.

Before closing, I want to again commend you for communicating your strong support of legislation to provide supplementary capital for credit unions and to facilitate their net worth calculations. I appreciate your willingness to help insure Congress is aware of NCUA’s views, particularly on supplementary capital, and believe your recent letter will very helpful as we continue our pursuit of this authority.

Meanwhile, regulatory burdens are among the most significant problems facing credit unions today and helping to contain them is one of CUNA’s highest priorities. I sincerely appreciate your consideration of these recommendations and hope NCUA and CUNA will be able to work together to achieve meaningful regulatory relief for credit unions this year.

I look forward to visiting with you soon.

Best regards,

Bill Cheney President & CEO

Posted in CUNA, Federal, NCUA.