LAS VEGAS–Speaking to the NACUSO Network meeting here, NCUA Board Member Rodney Hood highlighted what he said are the silver linings for credit unions from the pandemic, where the agency stands on cryptocurrencies, and why he doesn’t believe credit unions need any additional oversight when it comes to consumer protection.
Hood, who received a standing ovation from the NACUSO audience for his strong support of the recently passed rule that expanded CUSO lending powers and which goes into effect at month’s end, said those silver linings include a credit union community that is in strong financial condition, that has seen steady membership growth, that stands at approximately $1.99 trillion in assets, and which has an industry loan-to-share ratio of about 90%.
Beyond that, industry capital averages 10.17%, well above statutory requirements.
The Role of CUSOs
Hood praised the role of CUSOs in that growth, and said the agency’s CUSO Directory now shows approximately 2,100 CUSOs are operating.
“When I look at the uptick in loans in the country, there is a direct correlation, and I would say causation, between the states with 50 or more CUSOS and that growth,” he said.
Supervisory & Regulatory Priorities
In addressing his supervisory and regulatory priorities, Hood:
- Reiterated his comments on the importance of cybersecurity, including the newly released tool, ACET.
- Reiterated his opposition to CECL, saying he had worked to stop “CECL from ever seeing the light of day. It bothers me all of you are going to be affected by that onerous rule. While it didn’t materialize to my liking, we at NCUA were able to fashion a rule where it would phase in over three years, beginning in 2023.”
- Urged CUs to be prepared for rising rates. “This is not a forward-looking statement, but we should be cognizant that interest rates may change. So, watch duration risk and other sensitivities.”
- Said the agency is doing its best to help CUs with the burden of BSA. “Please know we are trying our best to use automation and innovation to assist you with that. During a meeting at FinCEN, I learned of six credit unions that were able to capture the bad guys, thanks to SARs. Please let your people know their efforts are not for naught.”
It’s Personal
Issues Hood said are personal to him include:
- Corporate CUSO relief and broadened investment opportunities.
- The new NCUA Office of Innovation and Access. “I believe we need to be forward thinking and forward seeing.” Hood said once NCUA hires someone to head that office the agency will be able to create more regulatory sandboxes. “Sandboxing is something we should learn about from our counterparts in the U.K.,” said Hood, who plans to travel soon to the United Kingdom to do just that and will meet with the Bank of England and the Financial Conduct Authority.
- Helping the underserved community. “I often say financial inclusion is the civil rights issue of our day. I continue to advocate for all of us in the system to work together to provide small-dollar loans to marginalized communities."
- An Advisory Board in order to do a “better job of getting honest feedback from credit unions.”
Credit Unions & Crypto
In response to a question from an audience member on CUSOs being permitted to offer crypto services, Hood responded, “I believe the cryptocurrency market is something vitally important not just to credit unions but the overall financial services market. So, cryptocurrency needs to be a part of the credit union system. If you don’t have it it’s going to hurt your ability to compete with other financial services providers.”
Hood reminded the agency has already put out a request for comment on digital assets, and cryptocurrency is a part of that.
He added NCUA, like other regulators, is looking at putting guardrails around any potential crypto offerings.
“I don’t want to conflate guardrails with the heavy hand of regulation,” said Hood, adding that any rules will need to provide regulatory flexibility around crypto. “It’s not a luxury, it’s a strategic imperative. There will be more to come.”
Consumer Compliance
In response to another question about NCUA Chairman Todd Harper’s focus on greater consumer compliance oversight by the agency, with the audience member asking, “Where’s the fire?”, Hood said, “I am aware that from 1934 (when the FCU Act was passed) to present day there were men and women unable to have access to traditional financial services. What did they do? These hard-working men and women reached into their pockets, galvanized and created cooperative credit. Our system was created to give folks a fair chance, an opportunity to provide for families. We have done so for a century without taking advantage of the member-owners. Our growth would not be possible at all if we were known for taking advantage of our member-owners. Consumer protection is part of the bedrock of our industry. I am not aware of any egregious displays of consumer protection issues.
“When we see issues that warrant an investigation, we take action. But we don’t use the courts of public opinion to chastise or embarrass,” said Hood. “I see no reason to have any more heightened focus than we currently have.”
Starting New Credit Unions
Finally, Hood was asked about what can be done to address the challenges of de novo credit unions.
“We do need de novo institutions to serve rural communities, tribal communities,” he said. “We now have a working group looking at how to enhance the chartering process and, more importantly, how to expedite the process. Perhaps a cafeteria style approach. We are looking for a fintech-like tool that might help us in real time to address the issues de novos are facing.”