Mon, Mar 16, 2015
Credit unions can look forward to regulatory relief in the coming year, National Credit Union Administration Board Chairman Debbie Matz said during her remarks at CUNA's Governmental Affairs Conference.
“Since 2011, NCUA has streamlined and improved eight regulations to provide lasting relief for credit unions, but we’re not done yet,” Matz said. “I’m committed to making 2015 the year of regulatory relief.”
Matz described five areas in which NCUA will work to provide regulatory relief: supplemental capital, fields of membership, fixed assets, asset securitization and member business lending. This relief will help credit unions compete in a rapidly evolving marketplace. Matz made the comments during a keynote speech to the Credit Union National Association’s annual Governmental Affairs Conference. The full text of her speech is available online here.
Counting Supplemental Capital
Matz said NCUA will respond to comments that, under current law, the agency could count certain forms of debt as supplemental capital for the risk-based capital ratio.
“I understand the need for supplemental capital in certain circumstances,” Matz said. “So I assure you: I am committed to allowing supplemental capital to be counted in full.”
To do so, Matz said NCUA will take three actions:
- Provide consumer protections;
- Change the order of Share Insurance Fund payout priorities to recognize that supplemental capital accounts are not insured; and
- Set prudent standards, such as minimum redemption periods, for credit unions to offer subordinated debt to supplement their risk-based capital.
Matz also said a working group she established is exploring ways to increase access to secondary capital for low-income credit unions this year. The group is discussing potential legislative and regulatory changes for raising supplemental capital.
“NCUA can allow certain forms of supplemental capital for both risk-based capital and low-income credit unions,” Matz said. “For credit unions without a low-income designation, legislation is required to allow supplemental capital to count toward the seven-percent net worth leverage ratio.”
To address this issue, Matz said NCUA supports H.R. 989, the Capital Access for Small Businesses and Jobs Act.
Expanding Fields of Membership
NCUA will implement rule changes by the end of the year to make it easier for federal credit unions to expand their fields of membership.
“You should not be required to get approval from NCUA each and every time you want to add another group,” Matz said. “Last year, we proposed a rule designating seven categories of associations federal credit unions could automatically add to their fields of membership. This year, we would like to add even more automatic qualifiers.”
Matz said the Field of Membership Working Group she established is identifying obstacles to membership expansion and recommending rule changes to increase flexibility.
Removing the Fixed-Assets Limit
Next week, the NCUA Board will consider a proposed rule to eliminate the five-percent cap on fixed assets and authorize federal credit unions to set their own prudent limits.
“We all know over-concentration in fixed assets like buildings is dangerous,” Matz said. “Credit unions should prudently and deliberately make decisions about the level of assets to hold, but they should be able to do that without needless red tape. Decisions to upgrade your technology or your facilities should be your decisions to make—and yours alone.”
Permitting Asset Securitization
As the credit union system grows in size and complexity, many credit unions have adopted more sophisticated financial innovations. NCUA is responding to these changes with a proposal to allow large, qualified credit unions to securitize their assets.
“Securitization would permit these credit unions to tap new sources of liquidity and reduce interest-rate risk by converting fixed-rate assets to cash,” Matz said.
NCUA is now fine-tuning the proposal. Matz said she hoped the NCUA Board would approve a final rule later this year.
Easing Member Business Lending Burdens
Responding to credit union comments that the waiver process for business loans sometimes prevents them from making timely and prudent loans, NCUA plans to eliminate the need for such waivers.
“We’re going to move away from defining highly prescriptive, one-size-fits-all business loan underwriting requirements,” Matz said. “You know your members’ needs better than we do. Our business lending rules need to reflect that.”
NCUA will continue to provide business loan guidance and supervise effectively for sound commercial lending practices. Additionally, the agency will lift unnecessary limits on construction and development loans.
Matz concluded her remarks by reminding her audience she will always listen to stakeholders’ concerns and ideas about removing regulatory burdens.
“We will listen, and, where sensible, we will act,” Matz said. “Our number one goal is to keep the credit union system safe, sound and sustainable. You will have greater freedom in pursuit of that goal.”