WASHINGTON—Federal Reserve Vice Chairman of Supervision Randal Quarles finished the regulator's semiannual report to Congress in testimony before the Senate Banking Committee, during which a number of issues that impact credit unions were brought up, including the current expected credit loss (CECL) accounting
standard, tailoring regulations and regulators' accountability, among others.
During the hearing, Sen. Doug Jones (D-AL) asked Quarles about the unintentional consequences of the Financial Accounting Standards Board's (FASB) CECL standard, which Quarles said the Fed hopes to understand during the three-year phase in period.
NAFCU noted it has been seeking additional guidance on the issue, and has encouraged FASB and the NCUA to coordinate. FASB last week finalized changes – including a delay in the standard's effective date for credit unions.
Plans for Tailoring?
Sen. Bob Corker (R-TN) also inquired about the Fed's efforts to tailor regulations and the possible effects on the safety and soundness of the industry.
"We have two principle concerns as regulators: We have concern for the safety and soundness of individual institutions, and we have a concern for the safety and soundness of the system as whole and for the efficiency of the system as whole," Quarles said. "All of us as citizens benefit from the efficiency of the financial sector. That's what provides the support for economic growth, provides credit for small businesses and business generally … Our concern is that that system should be operating as efficiently as possible, and our regulation of that system, while achieving the objective of safety and soundness, is doing so in the most efficient way that's practical because when we do that, we support economic growth that benefits us all."
Risk Profiles
The Fed recently released a proposal to better align regulations with banks' risk profiles; NAFCU said it has encouraged NCUA to take a similar approach to provide credit unions with regulatory relief, arguing that size does not equal risk and there are other factors that should be considered when creating regulations and exemptions.
Responding to another question from Corker related to Fannie Mae and Freddie Mac, Quarles indicated the need for a comprehensive solution to housing finance reform.