And Now for Something Different…

This space is normally where I share my thoughts on regulatory issues or NCUA actions, to give readers insights into not just the “what” but the “why” behind the decisions I make each day as NCUA Chairman. This month’s column is different; it’s an appreciation column.

Too often in life, we aren’t always grateful for things we don’t notice. In my daily work, I have come to appreciate more and more the flexibility the existing Federal Credit Union Act gives to NCUA and its Board when it comes to meeting our mission of safety and soundness and protecting consumers. As decisions come up, I now regularly marvel at something Congress really did right—the Federal Credit Union Act and the powers and responsibilities it grants NCUA to meet the needs of consumers in an evolving marketplace and protect for safety and soundness during changing economic environments.

For example, under the act, the NCUA Board has the latitude to make improvements to our exam programs and processes, to use technology better and make our examinations more efficient and less intrusive. We did exactly this through our Exam Flexibility Initiative, precisely because the Federal Credit Union Act is deliberately not highly prescriptive in this area.

It allows NCUA to extend exams for well-managed credit unions during a stable economic environment, while preserving our ability to coordinate with our state partners on the timing of those exams to align with their individual states’ statutes and regulations. In contrast, the banking regulators recently had to go to Congress to extend the exam cycle for banks and thrifts.

Another example is that the act explicitly gives the NCUA Board the ability to set applicable definitions under the field-of-membership statutory language. That allows NCUA to periodically modernize elements of our field-of-membership regulations as times and technology evolve, and so our most recent field-of-membership modernization effort will go into effect on Feb. 6. Prior to the effective date of the new rule, we will hold a webinar on Feb. 1, to inform credit unions about their new options and how the agency will process requests for field-of-membership modifications.

Credit Unions Continue to Benefit from a Flexible Act

Through the Federal Credit Union Act, Congress deliberately separated NCUA from other banking agencies. It also gave credit unions a separate insurance fund to protect member shares and allowing for a 1-percent capitalization that credit unions still hold on their books rather than expense as a premium as banks do. Finally, it made NCUA an independent financial institutions regulator, with bipartisan oversight through the Board structure.

I like to remind credit union groups who come and exchange their views with me on issues of the day that we should all be grateful—and not take for granted—the strong credit union system we have that the Federal Credit Union Act makes possible. This system now exceeds $1 trillion in insured member shares and deposits. Our credit union system also helps consumers, but to do so it requires the freeing flexibilities provided to the regulator, to nimbly ensure system strength continues.

We can be grateful that the Federal Credit Union Act’s statutory framework does not unduly constrain NCUA’s freedom to act innovatively, expeditiously and creatively when necessary or critical, such as in a financial crisis, or require NCUA to get Congress to act each time to make progress on key issues. Except for emergency situations, it can be very difficult to change the law. After all, NCUA once had to go to Congress to establish the Corporate Stabilization Fund rather than impair the Share Insurance Fund.

Over the past year and working and with our state partners, NCUA has made great progress improving the regulatory system without having to ask Congress to pass new laws. We’ve extended the exam cycle for low-risk, well-managed credit unions with less than $1 billion in assets. We’ve begun the process to upgrade our outdated technology systems. We’ve also begun work to improve the Call Report process. And, we’ve reinstated annual budget briefings.

Each of these actions is a true testament to the flexibility the Federal Credit Union Act provides. That flexibility should not be taken for granted by the regulated community. As we learned during the effort to pass the Credit Union Membership Access Act in 1998, efforts to change one part of the act can result in additional, unexpected changes to other unrelated parts of the act that can last for decades, such as the current limitations on member business lending.

I’m proud this NCUA Board works so well, and thank my Board colleague, Mark McWatters, for his constructive efforts to work together. Some said a two-person NCUA Board was going to be a sure-fire recipe for gridlock, but since I became Chairman the Board offices have worked diligently and successfully to find common ground and, as a result, we have regulated with one voice on every issue that has come before the Board.

This NCUA Board has pragmatically worked together to accomplish many good things. Its actions have benefitted America’s consumers and given credit unions more flexibility and regulatory relief to serve those members, without compromising safety and soundness. I look forward to continuing to work together in that same spirit in 2017.

— Rick Metsger