As Prepared for Delivery on August 14, 2019.
Thank you very, very much, Lucy. Thank you all for having me here today; I am delighted to be with you once again.
I want to begin by thanking Lucy for her years of leadership in building a collaborative relationship between the NCUA and state regulators on a host of important regulatory and supervisory issues.
I valued our partnership when I served on the NCUA Board a decade ago, and I am looking very much forward to working with you again. Since I took the oath of office as NCUA Chairman, people have asked me if I have noticed anything different from the last time I sat on the Board.
I tell them, you know, what I notice the most are the things that have not changed:
- The enthusiasm that people who work in the credit union system — at NCUA, in the associations like NASCUS, in the state regulators’ offices, in the leagues, and in the credit unions themselves — bring to their work.
- The commitment to our cooperative, non-profit, member-owned-and-driven model that has built a $1.5 trillion industry that provides affordable financial services to more than 117 million credit union members and protects their hard-earned assets.
- And the professionalism that marks our work.
These qualities are particularly important today, because our industry is facing a rapidly changing world. Technology is evolving at an ever more rapid pace, forcing us to re-examine some long-held assumptions, requiring us to adapt.
I often speak about issues and concerns that keep me up at night, thinking:
- How do we confront the constant and growing threat of a cybersecurity breach that could expose credit union members’ data or make the credit unions themselves victims of extortion or theft?
- How do we do more to reach the underserved?
- What can we do to improve financial inclusion to address the civil rights issue of my generation?
These are complex issues; the challenges and opportunities facing the credit union system are the responsibilities that come with our jobs. But those qualities in the people I work with are what give me energy and make me confident that we, all of us together, can address issues and make the most of opportunities on behalf of the millions of Americans who are depending on us to protect them and their credit unions.
Another thing that has not changed is the importance of the dual chartering system and my belief in its value. The founders of our great country set up a federalist system, with the national and state governments having defined roles. That system has proven itself to be effective.
Likewise, a system of regulation and supervision where federal and state authorities work in their defined roles while cooperating with one another, always with the common goal of a safer, sounder, more efficient and innovative credit union industry, has clearly demonstrated its merits.
Essential to making this system work is a solid relationship between the NCUA and our state regulators built on mutual trust and respect. State regulators are valuable partners with NCUA, often providing cogent advice and ideas for NCUA’s consideration on a broad range of issues.
In my first meeting with the entire NCUA staff, I said, “the NCUA should take every opportunity to cooperate with state regulators in regulating and supervising federally insured, state-chartered credit unions and the NCUA should maintain a strong partnership with state regulators and reduce or eliminate unnecessary duplication of efforts.” In that regard, I am happy to be here today to build on these efforts.
As an example of that productive relationship, allow me to use part of my time today to update you on the efforts and the accomplishments of the NCUA-State Regulators Working Group. This group was created two years ago, based on recommendations in the October 2016 Exam Flexibility Initiative report.
One of the group’s primary charges is to look for ways to reduce or eliminate unnecessary overlap between the prudential regulators of federally insured state-chartered credit unions and the insurer, the NCUA. The goal is reducing the regulatory burdens wherever possible on federally insured, state-chartered credit unions while maintaining safety and soundness.
Let’s be clear: The goal is not to simply get rid of regulations for the sake of getting rid of regulations. The goal is to create a regulatory system that is effective, but not excessive or duplicative.
The group is also exploring ways we can learn from and leverage each other’s best practices and approaches to enhance the regulation and supervision of all credit unions, whether federal or state-chartered.
NASCUS also supports the Working Group, which is comprised of NCUA senior staff and representatives from six state regulatory agencies:
- Superintendent Kate Averill from Iowa;
- Deputy Commissioner Dudley Gilbert from Oklahoma;
- Commissioner and NASCUS Chairman John Kolhoff of Texas;
- Chief Administrator Anthony Rogers of Tennessee;
- Senior Deputy Commissioner Steve Pleger of Georgia; and
- Director Kim Santos of Wisconsin.
My thanks to you for all your contributions to this important initiative.
The group is committed to evaluating the examination program for federally insured, state-chartered credit unions and making recommendations for changes. The members of the group began their work by hosting focus groups and gathering ideas through various stakeholder outreach efforts.
Based on that foundation work, the group broke its task down into three phases. Phase one — now completed — was devoted to developing a pilot program for an alternating exam program. During phase two, which the group is in now, is about identifying ways to improve the coordination and cooperation of state regulators with the NCUA when we’re conducting joint exams or supervision of federally insured state charters. Looking ahead to phase three, the group will explore other areas where enhanced coordination and cooperation would be beneficial to the credit union system.
I am delighted to report the Working Group has made some significant accomplishments.
First, this past January, the group launched a three-year, or one full alternating exam cycle, pilot program to evaluate three alternating exam options:
- Alternating lead—the NCUA and the state regulator conduct joint exams of federally insured state charters, with the two agencies alternating the lead role in the exams.
- Alternating with limited participation—the NCUA and the state regulator alternate conducting exams with some involvement from the other agency.
- Alternating—the NCUA and the state regulator alternate conducting exams independently.
Six state regulators, California, Florida, New Hampshire, Oklahoma, South Carolina, and Texas, are participating with NCUA to pilot alternating exams of some of the federally insured, state-chartered credit unions in their states. To date, I can report the group has already received significant positive feedback.
Second, the group has developed a new framework for even greater cooperation and coordination among NCUA regions and state regulators. This framework looks at procedures, practices, and protocols we are going to use in coordinating our respective activities in supervising federally insured state charters.
Third, the group has developed an updated Document of Cooperation (opens new window) that John Kolhoff and I will be signing shortly.
This is a public declaration of our mutual commitment to protecting our country’s credit union system. The last document was signed in 2007, and this new Document of Cooperation is a significant update. It reinforces and improves upon our mutual commitment to cooperate and work together in regulating and supervising America’s credit unions.
We are pledging that we will work within the bounds of the laws and safety and soundness to foster an environment of innovation leading to greater prosperity and create support for the success of all credit union system stakeholders. The updated document is also a re-affirmation of the strong, cooperative, and effective professional relationship between NCUA and state regulators.
So, you can see the Working Group has made great strides since its inception. Looking ahead, the members of the Working Group have laid out several next step:
- They are cataloging examination procedures and practices of the state regulators and NCUA with the goal of promoting best practices to strengthen the examination program;
- They will be providing a significant level of joint resources devoted to the development and rollout of the new MERIT examination and risk identification tool, which is scheduled for release as early as the fall of 2020; and
- They will be identifying and promoting best practices in conducting joint exams with the goal, of reducing or eliminating unnecessary overlap and providing federally insured state-chartered credit unions with a more seamless examination experience.
Overarching the Working Group’s specific accomplishments is the broader benefit of increased cooperation. A great deal of constructive dialogue, creativity, and improved understanding among the parties has come out of this process, so, again, I commend everyone involved for their efforts, and I look forward to what’s ahead.
What we’re doing is really no more than staying faithful to the fundamental credit union principle of people helping people — working together to support one another, to share their best ideas, to fill needs, to find solutions, to create opportunities, to help credit unions and their members growth, thrive, and prosper.
In June, the NCUA celebrated the 85th Anniversary of President Franklin Roosevelt’s signing of the Federal Credit Union Act. In just 85 years, this industry has grown rapidly, and now serves 117 million members, nearly one-third of America, and holds assets of more than $1.5 trillion. That’s an outstanding success story.
Our challenge now is to determine the best ways to keep that success going. A robust partnership between the NCUA and NASCUS is a great place to start.
I think if FDR, and all the early leaders who helped to bring the credit union movement to life, could see what’s happening today, they’d be astonished at how far we’ve come. Moreover, they’d be extremely proud of how closely the industry remains committed to its original vision for a system of cooperative credit that is responsive to local needs.
My great hope and expectation is that this partnership will prosper and thrive by holding tightly to that core value of “people helping people.”
But more fundamentally, the key to this industry’s future success lies with staying true to the values the credit union system was founded upon and the commitment to people helping people by fostering greater financial inclusion, accessibility, and opportunity for all Americans.
I look forward to working with you to advance that worthy mission. Thank you very much. I look forward to our continued partnership to insure the safety and soundness of America’s cooperative system of credit.