ARLINGTON, Va.–Both NAFCU and NASCUS have provided feedback to NCUA on its third round of regulatory review under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA), and both trade groups see a number of issues they want to see resolved.
In its letter, NAFCU opined that when it comes to loans and lines of credit to officials, NCUA's EGRPRA review is narrowly focused on specific rules. But NAFCU Director of Regulatory Affairs Alicia Nealon raised broader concerns in the letter. Nealon noted, for example, that Section 701.21(c)(8) of the agency's rules and regulations includes a prohibition against credit union officials, employees and their immediate families from receiving incentives or outside compensation for loans made by credit unions. Nealon said NAFCU reads this prohibition as allowing the inclusion of loan growth in the "'overall financial performance' calculus as it is not a determinative factor."
In addition, she urged the agency to allow more flexibility when examining a credit union's methodology for calculating "overall financial performance."
Regarding reimbursement, insurance and indemnification of officials and employees, Nealon also asked that NCUA update section 701.33 of the rules and regulations to "clearly delineate what is included and not included in the calculation of compensation."
In other comments, Nealon urged NCUA to move swiftly on the MBL proposal, with implementation of a final rule delayed no longer than 12 months.
As for the agency’s revised risk-based capital proposal, which has yet to be scheduled for a board vote, Nealon reiterated concerns that the proposal remains "fundamentally flawed." The current proposal "fails to create a true risk-based approach that would reflect lower capital requirements for lower-risk credit unions and higher capital requirements for higher-risk credit unions," she emphasized.
Nealon also asked that NCUA review NAFCU's request to return to an 18-month examination cycle for healthy credit unions "that will efficiently provide relief and effectively maintain our industry's safety and soundness."
Meanwhile, the National Association of State Credit Union Supervisors commended the agency for voluntarily participating in the review process, and also offered a number of suggestions for changes – in particular, to ease the regulatory burden on federally insured, state-chartered credit unions by changing the format of agency rules to incorporate in one place all rules covering share insurance.
“The current structure of NCUA's Rules and Regulations is unnecessarily cumbersome and confusing for FISCUs and examiners alike,” NASCUS wrote. “NCUA could erase any confusion, and ease regulatory burden, by systematically reorganizing its Rules and Regulations to provide federal and state examiners, and FISCUs, a consolidated chapter of applicable insurance regulations.
In other comments, NASCUS:
- Cited its concern that the current regulatory framework for the corporate system is too homogenized, and recommended “prudent diversity” within the corporate system, particularly with regard to state charters. “NCUA’s corporate credit union rule should provide for diversity of regulation at the state level for state-chartered corporate credit unions,” NASCUS wrote. “Such a provision could be modeled after existing NCUA share insurance provisions for natural person credit unions that allow for state-specific rules.”
- Urged the agency to clarify what fidelity bond coverage rules apply to FISCUs. “Rather than incorporate by reference, NCUA should establish in § 741.201 the fidelity bond coverage requirements for FISCUs,” the association wrote.
- Advocated that the agency recognize that not every state requires monthly meetings of the credit union board, and adjust its rules accordingly for reporting purposes. “In some states, credit union boards meet every other month,” NASCUS wrote. “NCUA should revise guidance to provide that notification at the next board meeting satisfies the requirement. Allowing credit unions to sync their reporting to board meetings, rather than monthly, will help ensure boards focus on the information presented while providing credit unions regulatory relief by potentially reducing the paperwork of preparing reports for non-board meeting months.”