WASHINGTON—A number of developments of interest to credit unions have taken place on Capitol Hill, including discussions around stablecoins, a response from regulators to this week's devastating tornadoes, and passage of the NDAA without language that would give banks access equal to that of credit unions when it comes to military bases.
Here's a look at each:
The Senate Debates Stablecoins
One senator’s proposed “principles” for stablecoins were released during a hearing on Capitol Hill, during which the Senate discussed whether special purpose charters for stablecoin issuers should be created.
The proposal and the debate came during a hearing by the Senate Banking Committee, at which there was also discussion of the President’s Working Group of Financial Markets’ (PWG) recent report.
Ranking Member Sen. Pat Toomey (R-PA) released his principles for stablecoins at the hearing, in which he called for a removal of the “insured depository” suggestion of the PWG report, and instead called for special purpose charters for stablecoin issuers that are not insured depository institutions, NAFCU reported.
The Principles
In addition to removing the “insured depository” suggestion from the PWG report definition, Toomey’s other principles include:
- Stablecoin issuers would choose from at least three regulatory regimes based on their business models
- All stablecoin issuers should have to adopt clear redemption policies, disclosure requirements regarding the assets backing the stablecoin, and potentially meet liquidity and asset quality requirements
- Commercial entities should be eligible to issue stablecoins, provided they choose one of these regimes
- Non-interest bearing stablecoins should not necessarily be regulated like securities
- regulation should protect the privacy, security, and confidentiality of individuals utilizing stablecoins, including allowing customers to opt out of sharing any information with third parties
- Financial surveillance requirements under the Bank Secrecy Act should be modernized, including for existing financial institutions, in light of emerging technologies like stablecoins
Response to Tornadoes
Separately, NCUA has joined with the Comptroller of the Currency, Federal Reserve Board, the FDIC and state regulators in saying they recognize the serious impact of the recent tornadoes on the members/customers and operations of many financial institutions and will provide appropriate regulatory assistance to affected institutions subject to their supervision.
In their statement, the agencies addressed:
Lending: “The agencies encourage financial institutions to work constructively with borrowers in communities affected by tornado damage. Prudent efforts to adjust or alter terms on existing loans in affected areas should not be subject to examiner criticism. Institutions should individually evaluate modifications of existing loans to determine whether they represent troubled debt restructurings according to U.S. generally accepted accounting principles. Institutions should consider the facts and circumstances of each borrower and loan, and apply judgment, as not all modifications will result in a troubled debt restructuring. In supervising institutions affected by tornado damage, the agencies will consider the unusual circumstances these institutions face. The agencies recognize that efforts to work with borrowers in communities under stress can be consistent with safe-and-sound practices as well as in the public interest.”
Temporary Facilities: “The agencies understand that many financial institutions face staffing, power, telecommunications, and other challenges in re-opening facilities after tornado damage. In cases in which operational challenges persist, the primary federal and/or state regulator will expedite, as appropriate, any request to operate temporary facilities to provide more convenient availability of services to those affected by tornadoes. In most cases, a telephone notice to the primary federal and/or state regulator will suffice initially to start the approval process, with necessary written notification being submitted shortly thereafter.”
Publishing Requirements: “The agencies understand that the damage caused by tornadoes may affect compliance with publishing and other requirements for branch closings, relocations, and temporary facilities under various laws and regulations. Institutions experiencing disaster-related difficulties in complying with any publishing or other requirements should contact their primary federal and/or state regulator.”
Regulatory Reporting Requirements: “Institutions affected by tornadoes that expect to encounter difficulty meeting the agencies’ reporting requirements should contact their primary federal and/or state regulator to discuss their situation. The agencies do not expect to assess penalties or take other supervisory action against institutions that take reasonable and prudent steps to comply with the agencies’ regulatory reporting requirements if those institutions are unable to fully satisfy those requirements because of tornado damage.”
Investments: “Institutions are encouraged to monitor municipal securities and loans affected by tornado damage. The agencies realize local government projects may be negatively affected by the disaster and encourage institutions to engage in appropriate monitoring and take prudent efforts to stabilize such investments.”
A complete list of the affected disaster areas can be found at https://www.fema.gov/disasters.
Senate Passes NDAA
Also in Washington, the Senate has passed a compromise version of the fiscal year 2022 National Defense Authorization Act (NDAA), just over a week after the House passed the same bill. Neither version contains language CUNA, Leagues, and credit unions fought to exclude that would have allowed banks the ability to operate rent-free on military bases.
The bill will head to President Joe Biden for his signature.
“We thank the Senate for excluding any expansion to banks of the arrangement between credit unions and the Department and Defense,” said CUNA President/CEO Jim Nussle. “Credit unions have earned the arrangement through a legacy of service to military members and their members, which has been recognized by legislators in both chambers.”
As CUToday.info previously reported, earlier versions of the NDAA contained the text of the Secure and Fair Enforcement (SAFE) Banking Act, as well as remote notary authorization, both of which had strong credit union support, before being dropped.