By Lucy Ito
When the subject of NASCUS comes up these days, chances are the discussion is about the “overhead transfer rate” (OTR). And why not? Over the past several months, NASCUS has effectively articulated the message that the way the OTR is set by the NCUA Board needs greater transparency. To that end, the NCUA Board will vote in January to post the OTR for public comment in the Federal Register.
The OTR is just one of a number of significant issues that NASCUS is pursuing on behalf of the nation’s state credit union system. All of these issues comprise an agenda that, NASCUS believes, would strengthen state credit unions and benefit the credit union system at large.
Here’s a quick rundown:
- Marijuana businesses banking: NASCUS supports federal legislation that clarifies the ability of financial institutions to provide financial services to state-authorized cannabis businesses. This position has nothing to do with the legalization of marijuana – that’s a decision for state legislatures to make (and, in fact, NASCUS takes no position on that decision). However, for those states that have legalized sale and possession of marijuana, clarity is needed for credit unions to serve those members with legitimate cannabis businesses under state law, and enable the credit unions to pursue business and development plans with a clear understanding of federal regulatory expectations.
- Five-member NCUA Board: NASCUS supports expanding the NCUA Board from three to five members, with one of the additional board seats reserved for a person with experience as a state credit union regulator. The expanded body would enhance the board’s deliberative process, expand its collective expertise, and improve the efficient administration of NCUA business – including by permitting board members to communicate with each other directly without triggering Sunshine Act requirements. Short of an expanded board, we are committed to achieving one dedicated NCUA Board seat for an individual with state regulator experience. That approach is grounded in our firm belief that, given the substantial interaction between the Board and state regulators and the importance of the dual-chartering system to the health and safety of the entire credit union system, doing so would enhance supervisory coordination between state and federal regulators, and inject important perspective into the board’s deliberations on the impact of its decisions on local communities.
- Separation of NCUA roles: NASCUS has long held that the agency’s role as the chartering authority for federal credit unions and as the administrator of the share insurance fund presents a potential conflict of interest, unless those functions are internally separated. Doing so should reflect an equitable and distinct distribution of NCUA resources, to ensure that the insurance fund, partially supported by state-chartered federally insured credit unions, is used exclusively for appropriate insurance related functions as defined under the law.
- Consolidation of rules: NCUA should consolidate all federal share insurance rules in a single section of its Rules and Regulations. The current practice, incorporation by reference, is cumbersome and confusing for FISCUs and examiners alike. By systematically reorganizing its rules and regulations, and consolidating the share insurance rules, the agency could erase any confusion among federal and state examiners, and ease regulatory burden on FISCUs.
- Expansion of “net worth” definition (and use of supplemental capital): NASCUS supports broadening and modernizing the definition of “net worth” in the Federal Credit Union Act to permit state-chartered credit unions to include other forms of capital in any capital calculations. Doing so would permit supplemental capital to be counted as regulatory capital – which would improve the safety and soundness of the credit union system and add additional protection for the NCUSIF. Healthy, well-run credit unions should be allowed to utilize certain specified forms of supplemental capital – it’s just common sense that these institutions should have the tools they need to maintain safe capital levels during both good and challenging economic times.
There are more issues, but these are the “top 5” (plus the OTR) long-term issues that NASCUS pursues on a daily basis, along with list of sundry other topics that daily flow through our organization (exam scheduling, risk-based capital, the proposed new business lending rule, and many others).
This is an ambitious agenda, to be sure. But our ambition to be the voice of the credit union system has never wavered over the past half century. It’s a record we hope to maintain for the next 50 years.
Lucy Ito is president/CEO of the National Association of State Credit Union Supervisors (NASCUS). For info: www.nascus.org.