NCUA Board Member Tanya Otsuka Remarks at the 2024 Governmental Affairs Conference

As Prepared for Delivery on March 5, 2024

Thank you, Mia, and thank you to Jim and everyone at America’s Credit Unions for the invitation. Special thanks to the convention center staff and everyone behind the scenes who helped put this event together and are making sure it runs smoothly.

And of course, thank you all for being here and for the work you do in your communities every day.

I am honored to be here at this year’s Governmental Affairs Conference. It has been a dynamic two days and I have enjoyed speaking with so many people dedicated to the credit union movement.

Conferences like these give me the opportunity to hear directly from you about the challenges facing credit unions and their communities, as well as their many successes. It also gives me the chance to share my vision and priorities as a NCUA Board Member.

As many of you know, prior to joining the NCUA Board, I served as Senior Counsel for the majority staff of the U.S. Senate Banking, Housing, and Urban Affairs Committee, where I handled banking and credit union issues. Before that, I was an attorney at the FDIC for nearly ten years, working on many issues that cross over to the NCUA. During my time in these roles, the aftermath of the 2008 financial crisis, the COVID-19 pandemic, and the spring 2023 bank failures left a lasting impression on me. These experiences showed me firsthand the importance of safety and soundness and consumer protection, and the vital role that small and community based financial institutions play in our economy.

My work at NCUA will be guided by a commitment to a safe and sound financial system of cooperative credit that ensures members benefit from fair and affordable products and services. Safety and soundness and consumer protection are not two separate issues.

Safety and soundness rules mitigate risks to the Share Insurance Fund so that the NCUA can protect member shares in case of failure and not rely on taxpayers for support. Consumer protection laws are intended to ensure members understand the financial products and services offered to them and that they are offered on fair terms. They both depend on strong management. Consumer compliance failures can often indicate problems with internal controls, operational risk, or lead to broader financial risks. And unfair banking practices are not sound banking practices. When fees or costs for products and services exceed operational expenses, raise concentration risk, or are disproportionate to the benefit, that not only raises safety and soundness and consumer protection concerns, but it also goes beyond the member-first mission.

That is why it is important to stay focused on how well credit unions are serving their members. When members are harmed, we have a responsibility to hold institutions accountable and make sure customers are made whole. These guardrails are in place to make sure we have a stronger, fairer, and more competitive marketplace for credit unions and consumers alike.

I will also focus on making sure that credit unions, especially small, low-income, and minority depository institutions, can continue to stay competitive and provide affordable financial services to their members in a constantly evolving financial system. We know that across the country there are many communities that have limited access to safe and affordable financial services. The number of banking deserts is increasing. Many rural communities have fewer resources after years of disinvestment and face higher levels of persistent poverty. Black and Hispanic families have about one million dollars less wealth, on average, than white families, and racial disparities in lending still exist today across income levels.

Home ownership is out of reach for most Americans – just 15 percent of homes for sale are affordable for a typical U.S. household. As a country, we have a lot of work to do to address these geographic, racial, and socio-economic disparities, and credit unions play an important role.

As not-for profit cooperatives, credit unions have an obligation to meet the deposit and credit needs of their members. I am encouraged by the many examples of credit unions doing just that. To encourage more workforce housing, a credit union in Oregon offered lower interest rates for properties that maintained affordable rental rates. There’s a credit union in Virginia that partners with Habitat for Humanity, the Federal Home Loan Bank, local government, the CDFI Fund, and others to offer down payment assistance and non-conforming home loans for those who may not qualify for a traditional mortgage. An Ohio MDI credit union recently expanded to a former bank branch to continue to serve that area of the community. There are several credit unions that have auto portfolios with an average credit score in the 500s, but their delinquency rates are below one percent.

The NCUA has many resources available through its ACCESS initiative, grants to low-income credit unions under the Community Development Revolving Loan Fund, and free online classes on strategic planning and serving underserved communities. We recently finalized our updated MDI policy statement, and the NCUA has several small credit union initiatives, including the small credit union exam program and small credit union support program.

I hope to keep learning from credit unions that are finding creative ways to meet the unique needs of their members. And I will continue to focus on the efficacy of these programs to see how we can improve and build on them. I welcome your feedback and ideas – if the NCUA isn’t hitting the mark on these efforts, let us know. So many of you and those in your communities are thinking about the same issues, and I look forward to working together. While not all credit unions may be solely dedicated to serving marginalized communities, ALL credit unions must contribute to a fairer, more just, and inclusive financial system.

I also appreciate many of the challenges your institutions are facing. I heard from the Small Credit Union Committee on Sunday about cybersecurity challenges and the potential for increased delinquencies. I’ve heard about the increasing cost of funds and a slowdown in lending growth, which has put pressure on earnings. The increasing number of large credit unions with CAMELS 3 scores is a concerning trend, and I am watching this closely. Broader economic challenges come on top of external pressures to adopt cutting edge technology to compete with banks and fintech while ensuring you can prevent the next cybersecurity breach.

This is where the credit union difference really matters. Lower interest rates, lower fees, more affordable products, and member-driven relationship banking are what gives credit unions their competitive edge. For example, a recent CFPB survey found that credit unions offer some of the lowest credit card interest rates. We want to see more consumers go to credit unions to get a checking account, credit card, or auto loan, instead of online lenders, fintech apps, and megabanks that have no connection to the local community.

The NCUA’s job as a strong, effective, and independent regulator is critical to protecting the millions of members who rely on us to safeguard their hard-earned money. By focusing on the fundamentals before there is a problem, we can ensure credit unions are well positioned for the future and able to meet their members’ financial needs in good times and bad. Ultimately, members benefit from access to a healthy credit union system and protecting that is central to why we are all here today.

Thank you, and I look forward to continuing to engage with all of you.