NAFCU is urging NCUA to outline its overarching approach to risk mitigation in the CU system, in light of several recent moves the agency has made or has indicated it will be tackling in the near future.
In a recent letter to NCUA Chairman Debbie Matz, NAFCU President and CEO Dan Berger said that while credit unions understand the importance of the regulatory ensuring the safety and soundness of the CU system, "we firmly believe that NCUA needs to more fully outline its long-term strategy and goals," suggesting that credit unions are currently unable to fully analyze the impact of the agency's initiatives without knowing the regulator's ultimate goals for mitigating perceived risk.
Berger noted that over the past few years NCUA has made a number of proposals on such matters as risk-based capital, a final rule on emergency liquidity and the establishment of a risk-based share insurance premium structure. The concern, Berger said, is that all of these initiatives taken together likely will worsen the regulatory burdens credit unions already suffer from. Consequently, NAFCU asserts, credit unions need to be made aware of the full scope and impact of all such initiatives related to risk-mitigation.
NAFCU is also asking NCUA to provide a timeline for the implementation of the aforementioned proposals.
Dennis Dollar, an Alabama-based credit union consultant, suggested that any attempt to enhance communication between NCUA and the CUs it regulates is a good thing, urging greater transparency from NCUA. But as a former NCUA chairman himself, he noted that a certain amount of tension between regulator and regulated is normal, adding,
"more dialogue and transparency makes it a more healthy tension."
But will NCUA provide such an outline as NAFCU has requested? To a certain extent, the agency could argue it already has.
John Fairbanks, a spokesman for NCUA, told Credit Union Journal that the agency publicly posts a strategic plan every three years, as well as an annual performance plan outlining the agency's goals.
"The overarching goal is keeping the credit union system safe and sound," he said.
In January, NCUA Chairman Matz sent all federally insured credit unions the agency's annual Supervisory Letter to Credit Unions., Fairbanks said. "The letter details NCUA's supervisory priorities for the coming year, so credit unions can prepare for NCUA examiners' approach to address and mitigate potential risks in the system," he said.
For 2015, NCUA's supervisory priorities are interest rate risk, cyber-security, liquidity and contingency funding rule compliance, Bank Secrecy Act compliance, and continued due diligence and ongoing monitoring of lending programs, he added. "Additionally, every six months, NCUA publicly posts a Semi-Annual Regulatory Agenda that lists potential rulemakings that the board might consider in the near future," Fairbanks offered.
It remains to be seen whether NCUA will provide a more detailed response to NAFCU's request.
"Whether NCUA responds, in whole or in part, is more of a political question than a legal question," said Ben Rogers, research director for Filene Research Institute. "For requests this broad, NCUA could argue that its ongoing disclosure of information, in proposed rules, in letters to credit unions, in board meetings, is the appropriate venue for notifying the industry. It could also argue that it's more effective to roll out proposals and actions one by one rather than dumping a huge framework on the industry."
Or, Rogers expanded, NCUA could decide that articulating and releasing its framework would be beneficial for credit unions overall and win it some goodwill among credit unions.
Looking ahead, Rogers indicated he suspects NCUA will demur. "Giving trade groups and credit unions the whole road map, if there even is a whole road map, would give them more battles to fight," he said. "I suspect the agency prefers to fight its battles one at a time."