WASHINGTON–In advance of today’s House hearing by the Committee on Financial Services on the NCUA budget, CUNA, NAFCU and NASCUS have filed comment letters calling on Congress to address with NCUA everything from the revised RBC proposal to third-party vendor authority to the overhead transfer rate to exam cycles.
NAFCU: Five Years of No Stakeholder Input
In its comment letter, NAFCU’s Senior Vice President of Government Affairs and General Counsel, Carrie Hunt, notes that for “the fifth year in a row, NCUA released and approved its annual budget without a formal hearing, thereby depriving the credit union industry and its membership, from which the agency receives its total funding, of the opportunity to formally comment on the agency’s budget…NAFCU believes that credit unions deserve clearer disclosures of how the fees they pay the agency are managed."
Hunt also addresses NCUA's risk-based capital proposal, writing that "credit unions believe this rulemaking is not only unnecessary given how extremely well-capitalized the industry is today, but they also fear this proposal will unjustifiably constrain their ability to grow and serve their communities."
Hunt said that legislative changes are needed for comprehensive capital reform for credit unions that would reflect lower capital requirements for lower-risk credit unions and higher capital requirements for higher-risk credit unions.
Additionally, Hunt emphasizes that the top challenge for credit unions is regulatory burden. She outlines several areas in which NCUA can provide some much-needed relief under existing law including field-of-membership and member business lending. "We urge you to encourage the agency to be aggressive in its actions to provide relief moving forward."
Hunt also outlines NAFCU's opposition to the agency's call for third-party vendor examination.
The letter outlines various areas in greater detail, including where regulatory relief can be provided. The full text of the NAFCU letter can be found in CUToday.info’s The Gov.
CUNA: NCUA Budget on ‘Expansive Trend’
In its 34-page comment letter, CUNA noted that NCUA had previously held “regulator budget hearings to allow stakeholders to weigh in on the operations of the agency; however, those hearings were discontinued in 2009. In the intervening years, the NCUA budget has continued an expansive trend while at the same time the budgets of other federal banking regulators have decreased. For all of these reasons, it is critically important that the subcommittee exercise regular and thorough oversight of NCUA to ensure that credit union member resources are efficiently and appropriately used.”
Among the issues CUNA is calling on the committee to explore with NCUA Chairman Debbie Matz, who will be testifying today, are:
- NCUA’s risk-based capital proposal, which CUNA said “misses the mark and Congress should consider statutory changes to credit union capital requirements.”
- Why NCUA should improve analysis of its rulemakings and why Congress should require public hearings on the NCUA budget.
- Problems with NCUA examinations and why Congress should enact examination fairness legislation.
- How NCUA should extend share insurance coverage to prepaid, payroll and other stored-value cards.
- How NCUA already has the authority it needs with respect to third-party vendors.
- Statutory and regulatory changes around MBL.
- Low-income designations.
- The overhead transfer rate.
- Capital planning and stress testing.
- Agency involvement with accounting standards.
A complete copy of the CUNA comment letter can be found in CUToday.info's The Gov.
NASCUS: 'Inequitable Impact'
Meanwhile, in its letter, NASCUS wants the committee to examine what it calls the “inequitable impact” of NCUA funding and exam cycles.
In its letter to committee leadership, NASCUS CEO Lucy Ito called on Congress to “carefully examine the proper separation within the NCUA of insurance and supervisory functions, and the impact of that imprecise distinction on the health and well-being of the dual chartering system.”
Ito noted that a primary and long-standing priority of NASCUS is to achieve “meaningful transparency around the NCUA’s budget and its allocation of expenses across state and federal credit unions,” in particular around the overhead transfer rate.
“Generally speaking, increases in the portion of the budget funded by the OTR have led to decreases in direct assessments on federal credit unions,” Ito wrote. “For example, by increasing the OTR in 2014, NCUA was able to shift a substantial portion of its expenses to the insurance fund, thereby enabling NCUA to reduce 2014 federal credit union operating fees by $10.5 million despite an increase of $26.5 million in its 2014 operating budget. This represents a significant reallocation of direct assessment expenses for federal credit unions into indirect insurance fund contributions which are borne by both state and federal credit unions.”
The NASCUS leader also urged the subcommittee leaders to push NCUA to raise the threshold for its annual insurance exam of state-chartered credit unions. “NCUA currently examines all federally insured credit unions with assets in excess of $250 million on a 12 month cycle, regardless of their CAMEL rating, risk profile, or frequency of examination by the state,” Ito stated. “In some cases, this inflexible policy can lead to state-chartered credit unions with over $250 million in assets being subject to two separate on-site exams in a 12 month period.”
Ito recommended raising the threshold for annual insurance exams to institutions with assets of $500 million or more, and relying on state regulator exams for institutions below that threshold on a risk-based basis.