The National Credit Union Administration’s board has had a seat vacant for two years. Chairman Mark McWatters and board member Rick Metsger marked that milestone Thursday by approving a revised regulation that provides the industry’s largest institutions with some targeted relief from capital planning and stress testing burdens.

The action took place at the board’s regular monthly meeting in Alexandria.

Under the new scheme, which amends an April 2014 regulation, institutions with less than $10 billion in assets remain exempt from capital planning and stress testing requirements. Institutions that do reach the threshold are classed in three tiers: those with less than $15 billion of assets, those with assets between $15 billion and $20 billion and finally $20 billion and above.

Mark McWatters Rick Metsger NCUA Board
The National Credit Union Administration's April 2018 board meeting marked two years during which Chairman Mark McWatters, left, and Board Member Rick Metsger have operated as a two-person committee as the agency waits for a vacant seat to be filled by presidential appointment.

Each tier got some relief. Tier 1 credit unions are no longer subject to stress testing, and they are no longer required to file their annual capital plans with NCUA. Instead, examiners will review their capital plans as part of the regular supervisory process.

Credit unions in Tier 2 are also relieved of the requirement to file annual capital plans for NCUA’s review and approval. And while Tier 2 institutions are still required to conduct stress tests, those tests are no longer subject to a 5 percent minimum stress-test capital ratio.

According to NCUA, only three institutions fall into Tier 3. They pose the biggest potential threat, so the only relief they received is the freedom to conduct their annual stress tests in house, subject to NCUA review and supervision. Tier 2 credit unions are also permitted to conduct their own stress tests under the new regulation.

The board began the process of amending its capital planning and stress testing regulations in October, introducing a proposed rule at its regular monthly meeting.

“I supported [the original] rule, and I support this revised rule today because it builds on what we have learned over the past four years,” Metsger said.

Common ground
Operating for long periods with an open seat can be a dicey proposition for NCUA, since it means either of the remaining members can exercise an absolute veto by withholding support for a measure. It’s a recipe for potential gridlock, but McWatters, a Republican appointee, and Metsger, a Democrat — who essentially traded places as chairman and board member with the election of President Trump — appear to have found a lot of common ground.

That has allowed them to move forward a number of key initiatives, including overhauling the agency’s field-of-membership and member-business-lending regulations, as well as merging the Temporary Corporate Credit Union Stabilization Fund into the Share Insurance Fund, returning more than $736 million to individual credit unions.

“In two full years side by side, we’ve been able to resolve all our differences,” Metsger said. “I daresay if other agencies worked as cooperatively as we do, we wouldn’t be hearing about so much distress in Washington.”

For his part, McWatters emphasized the respect he and Metsger share. “If you have respect, you can move to the next level, which is collaboration,” the chairman said.

In other actions, the board approved a revised advertising regulation that provides institutions with an abbreviated official statement for use in TV and radio commercials. It also makes more spots exempt from having to include the official statement.

The rule essentially brings NCUA’s policy into parity with that of the Federal Deposit Insurance Corp.

But what may be most notable about the new regulation is what isn’t in it: any action related to advertising and marketing on social media and other emerging platforms. Although the agency asked for comments addressing these developing channels, the regulator decided to stick to the traditional media—radio and television—because of how rapidly social media is evolving.