NCUA Chairman Launches Regulatory Modernization Initiative

On Sept. 19, 2011, National Credit Union Administration (NCUA) Board Chairman Debbie Matz launched a “Regulatory Modernization Initiative” to keep credit unions safe and sound while relieving regulatory burdens.

Matz described how regulatory modernization will balance two key principles:

  1. Safety and Soundness – Strengthening regulations necessary to protect the 91 million credit union members and the National Credit Union Share Insurance Fund
  2. Regulatory Relief – Stripping away regulations that limit flexibility and growth without jeopardizing safety and soundness

The NCUA is planning to modernize the following four main rules to strengthen safety and soundness by addressing marketplace practices and emerging risks:

  • A new loan participation protection rule covering both originators and buyers. This will require originators to retain some of the original loan risk on their balance sheets and require buyers to do due diligence not just at origination, but on an ongoing basis, just as they would for loans they originated in-house.
  • A new investment concentration exposure rule. This will limit concentrations in the riskiest investments, similar to the new investment standards for corporate credit unions.
  • A revised Credit Union Service Organization (CUSO) risk transparency rule. This update will provide a clearer picture of the off-balance sheet risks at CUSOs that sell high-risk services to credit unions.
  • A targeted interest-rate risk-management rule. This will require credit unions above certain asset sizes and risk thresholds to have an appropriate policy to manage their risk.

Balancing these safety and soundness protections, Matz introduced the following regulatory relief proposals to reduce credit unions’ compliance burdens:

  • Allowing credit unions to use simple derivatives as an interest-rate hedge;
  • Allowing credit unions to count subordinated debt toward risk-based net worth and to assign zero-risk weights to most U.S. Treasury securities;
  • Extending six of the seven remaining RegFlex provisions to all federal credit unions;
  • Supporting legislative efforts to lift restrictions on member business lending and supplemental capital for credit unions.


Questions? Contact the Compliance Hotline: 1.800.546.4465,

Posted in Compliance News, NCUA.