ARLINGTON, Va.–The National Association of State Credit Union Supervisors (NASCUS) has submitted a comment letter to NCUA regarding the agency’s 2022-2026 Draft Strategic Plan, saying several issues noted in the plan’s risk analysis warrant additional comment.
On credit union system risks, NASCUS said it agrees that those identified will present assorted challenges to the credit union system.
However, the issues that deserve additional comment include, according to the trade group for state regulators:
- NASCUS said it “shares NCUA’s concerns regarding the implications of continued system consolidation. Nevertheless, when contemplating a supervisory response to system consolidation, it is important to distinguish between appropriate regulatory and supervisory efforts to create a viable environment for credit unions and supervisory initiatives to hinder voluntary market consolidation.”
- “Excessive regulatory burdens can drive some credit unions to seek mergers and weaken the dual chartering system…Preemptive regulations must be precisely calibrated to avoid inappropriately hindering efficacious state supervision,” NASCUS said. “Additionally, minimizing state regulatory and supervisory authority preemption could materially mitigate some pressures that drive credit union mergers.”
Climate Change Risks
While NASCUS noted it has been working to understand the climate-related risks to the financial services sector, President and CEO Brian Knight expressed concern that comments regarding climate change could easily be misconstrued.
“Depriving farming communities of local financial services and discouraging agricultural lending is not sound policy and runs contrary to NCUA’s self-stated second strategic goal of improving the financial well-being of individuals and communities through access to affordable and equitable financial products and services,” said Knight. “Agricultural communities have limited access to financial institutions and fewer commercial and consumer credit choices in many cases. Encouraging credit unions to de-risk these communities would further diminish their already limited options.”
Concerns Over Subsidization
As it applies Strategic Goal 1, NASCUS said it agrees NCUA should maintain a financially sound share insurance fund (“SIF”) to protect credit union members from unexpected losses in the credit unions system, but is concerned that it frequently appears that the SIF is subsidizing NCUA’s Title I responsibilities rather than Title I activities benefiting the SIF as intended by the Federal Credit Union Act.
Regarding Strategic Goal 2, NASCUS said it welcomes the news that the NCUA’s new credit union chartering process will be streamlined, and supports the agency’s goals of improving individuals’ financial well-being, expand consumer access to credit union services, and support minority and low-income credit unions.
“We applaud the inclusion of deliberate strategies to improve this process and foster greater awareness of chartering opportunities. NCUA should also ensure its processes do not inhibit state chartering of new credit unions,” NASCUS stated. “NCUA should bifurcate its charter application and share insurance application process to make it easier for prospective credit union founders to understand the state chartering and NCUA share insurance requirements.”
Half the Assets in System
NASCUS further noted state-chartered credit unions make up nearly one-third of the credit unions and half of the assets and members in the credit union system.
“For most state credit unions, NCUA’s supervision relies exclusively on the work of state regulators and their dedicated exam teams,” the organization said. “NASCUS remains committed to working with NCUA to facilitate its working relationships with the state regulators and the state system.”
A full copy of the NASCUS comment letter is available here.