Regulatory Discussion Dominates NWCUA Governmental Affairs Forum

A candid conversation with state regulators highlighted the Northwest Credit Union Association’s (NWCUA) Governmental Affairs Forum, held at the NWCUA’s Federal Way, Wash., office on the afternoon of Wednesday, Nov. 2. The event presented an opportunity for regional credit union leaders to share concerns and comments with regulators and Association staff.

One of the overriding themes of the regulatory forum, which featured Linda Jekel, director of credit unions for the Washington Department of Financial Institutions (DFI), and Janet Powell, manager of the credit union program for Oregon Department of Consumer and Business Services and Division of Finance and Corporate Securities (DCBS/DFCS), was the importance of building relationships with examiners.

“I want to encourage you to really have dialogue with the examiner,” Powell said, adding that credit unions and examiners must “strive for the relationship.”

According to Powell, this relationship will create more efficiency in an always-difficult process by ensuring clear communication between the two sides, benefiting credit unions in the long run by helping examiners generate fair, accurate reports that include input from the credit unions. Frustrations were expressed from all angles about the relationship between National Credit Union Administration (NCUA) examiners and state examiners as well, and these problems are only exacerbated by continued budget constraints on the state level.

In addition to developing relationships with examiners, Powell and Jekel said that in order to help ease the examination process, credit unions should:

  • Be prepared—have materials and information examiners will need ready and accessible;
  • Be available and have daily contact with examiners;
  • Assign a “point person” who is knowledgeable, flexible and personable;
  • Work with the examiner to identify issues by the end of the first week; and
  • Address any issues before the examiner leaves to ensure the report is accurate and takes credit union input into account.

A great deal of discussion centered around documents of resolution (DORs) as well. Having been recently introduced to Oregon state-chartered credit unions, attendees had a number of questions about the process and about what exactly a DOR means in Oregon. Powell said that she is in the process of drafting an email outlining how DORs are used in Oregon and what credit unions should expect as these are implemented. DFI, meanwhile, will not be using DORs and will continue issuing supervisory agreements.

Also, interpreting non-specific language in exam reports, such as the difference between “recommendations” and “requirements,” has presented a challenge for credit unions when working with state and NCUA examiners. Attendees called for more clarification and standardized guidelines when using such terminology so that required action is clear and “recommendations” are just that.

Jekel also mentioned risk management as a specific area of concern for examiners, who are working to ensure that credit unions are taking appropriate precautions, particularly with regard to credit score migration. She encouraged credit unions to monitor credit score migration and reach out to members early in the process to limit losses.

Similarly, concentration risk represented an area of focus, as what constitutes “health” can vary greatly from one credit union to the next. Because concentration risk can range from too many fixed-rate mortgages to interest rate risk, collateral risk and borrowers’ default rates, the clear message was that it very much depends on the individual credit union and its appropriate due diligence, planning, and ongoing monitoring.

“It’s not scientific,” Jekel said.

Jekel also discussed member business lending (MBL), an issue that has gotten a great deal of coverage nationally in recent weeks and months. Jekel emphasized that while the Federal cap should be lifted, there is still room to maneuver and grow within Washington State’s current charter structure.

Credit unions in Washington that are nearing the 12.25-percent cap can apply for an exemption if they would like to continue to grow their member business lending operations. Credit unions are considered near the cap when MBLs represent between eight and 10 percent of assets—referring to unfulfilled commitments. Credit unions should do an independent audit six months to a year before they project to hit the cap, making sure they have the appropriate infrastructure and expertise in place. At that point, they can contact DFI, which will then determine next steps in this application process. DFI is willing to allowing exemptions for appropriate credit unions of 3-times their net worth.

The Consumer Financial Protection Bureau (CFPB) was discussed during the forum, and attendees praised the bureau’s rule-making process, which encourages dialogue and review from impacted parties prior to the promulgation of new regulations. Because it does not have a confirmed director, the CFPB still cannot issue new regulations. The CFPB, while having examination authority of credit unions over $10 billion, has direct enforcement of consumer protections. When following up on consumer complaints, state regulators have asked that any complaints about state-chartered credit unions be addressed to the state’s appropriate regulator for enforcement, easing the resolution of such concerns.

Director of Regulatory Advocacy Jaycee Winn called for credit unions to submit examples of concerns and challenges they have had when dealing with NCUA regulation—from compliance to examiners—in response to an opportunity for these concerns to be shared directly with Chairman Matz office. The Association will compile the stories and submit them to the executive office to provide real examples of credit union frustration and day-to-day concerns. She asked that credit unions email her with this information by Thursday, Nov. 10.

Following the regulatory forum, NWCUA staff members offered updates on a variety of topics. Director of Legislative Advocacy Jennifer Wagner and Vice President of Legal Affairs Mark Minickiello discussed recent activity on the legislative front, highlighting MBL, supplemental capital, and the super committee as key points of current political interest.

Wagner described October’s MBL hearing as “an important step toward moving this legislation,” with the next goal being to work with committee leadership to get the bill added to a larger measure or passed as a stand-alone item.

“We’re moving the needle, I would say, on supplemental capital,” she added, noting that Sen. Jeff Merkeley, D-Ore., has become a specific supporter of the issue.

Minickiello also noted that growing anti-bank sentiments and the subsequent groundswell of credit union support have not gone unnoticed by legislators.

“We’ve been getting calls from legislators saying, ‘What can we do to help credit unions?’” he said. “That’s a great call to get.”

NWCUA Assistant Vice President of Public Relations and Communications offered an update on opportunities for marketing and growth in the face of the upcoming Bank Transfer Day.

“It’s important to stay on the high road at this time,” Heider said, noting that credit unions were working to capitalize on the growing attention and welcome new members without specifically aligning with the Occupy movement or Bank Transfer Day.

She suggested that credit unions continue to emphasize the structural and philosophical differences between banks and credit unions and encouraged them to “stay on message” regardless of the current political and financial climate.

The forum closed with a political update, and NWCUA staff discussed the need for increased political advocacy and political contributions.

The NWCUA is planning to encourage increased advocacy among member credit unions through growing activity in an active Grassroots Advocacy Task Force, the reintroduction of the Credit Union Advocates program, and the development of Congressional Action Teams, all of which will work to promote the movement politically from different angles.

“We have enough credit union friends,” Wagner said. “We need credit union champions.”

These “champions” will be created by developing relationships with legislators earlier in the process. Credit unions need “to find our people and help them get into office,” Wagner said, as opposed to attempting to lobby representatives after they have already been elected. She cited Reps. Jaime Herrera-Beutler, R-Wash., and Kurt Schrader, D-Ore., as specific examples of candidates the Northwest credit union movement had helped get elected and who, as a result, have since shown particular loyalty to credit unions.

The next Governmental Affairs Forum is scheduled for April 17, 2012, in the Portland area.


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Posted in Advocacy News, NWCUA.