Good morning Chairman Crapo, Ranking Member Brown, and Members of the Committee.
Thank you for the opportunity to participate in this important hearing on regulatory relief for financial institutions.
Since 1987, the NCUA has undertaken a rolling three-year review of all of our rules and, although not required by law, the NCUA is an active participant in the Economic Growth and Regulatory Paperwork Reduction Act process. After independent analysis the agency has also agreed to comply with the spirit of the recently issued Executive Orders addressing the regulation of the financial services sector and the overall structure of the federal financial regulators.
The NCUA is unique among federal financial regulators because of its structure as a “one-stop shop.” The NCUA insures, regulates, examines, supervises, charters, and provides liquidity to credit unions. My mandate to staff is to make the NCUA even more efficient, effective, transparent, and fully accountable, while protecting America’s $1.3 trillion credit union community, its 108 million, largely middle-class, account holders, and the safety and soundness of the National Credit Union Share Insurance Fund.
The NCUA is committed to promulgating targeted regulation, accompanied by a thoughtfully tailored supervisory and examination program, as ill considered, scatter shot rules and compliance protocols stifle innovation and the ability of credit unions to offer appropriately priced services to their members. The agency endeavors to identify emerging adverse trends in a timely manner and remains mindful that regulators should learn from the past, yet focus on the future. Fighting the last battle gave us the S&L, leveraged buyout, and dot.com crises and laid the foundation for the near collapse of our economy in September 2008. A prudently regulated credit union community grows, thrives, and prospers and, as such, protects the taxpayers from bailout risk. This approach is consistent with the theme of the report recently issued by the U.S. Treasury Department and the view that well-capitalized and appropriately managed financial institutions warrant a reduced regulatory burden.
Along these lines, within the past 18 months, the NCUA has:
- Implemented a broad-based change to our member business lending rule, making it less prescriptive and burdensome so credit unions can better meet the needs of job-creating small businesses;
- Modernized our field-of-membership rules to enhance the opportunity for consumers to join a not-for-profit cooperative financial institution when they so choose;
- Revised our entire examination approach by implementing a flexible schedule that extends examination cycles up to 18 months; thereby reducing the agency’s presence in well-run credit unions and improving the deployment of our resources to where they are most needed;
- Issued a proposed regulation that enhances the due process rights of credit unions that elect to appeal an administrative action by the NCUA;
- Issued a proposed regulation requiring the disclosure of compensation payments related to a voluntary merger;
- Developed an approach to streamline and modernize the rules for corporate credit unions and the stress testing of the largest credit unions;
- Issued an Advance Notice of Proposed Rulemaking requesting comments on the issuance of supplemental capital for risk-based net worth purposes;
- Invited comments on revisions to our Call Report;
- Implemented our Enterprise Solutions Modernization program to introduce emerging and secure technology that supports the agency’s examination, data collection, and reporting efforts in a cost efficient and effective manner;
- Undertaken the development of a credit union advisory council; and
- Initiated a full review of the NCUA’s operations and management.
In addition to these actions, I intend to consider revisions to the agency’s risk-based net worth rule before its effective date in 2019.
The recent EGRPRA Report also highlights three beneficial legislative measures that would:
- Provide the NCUA with greater flexibility in designing capital standards for credit unions. Though I intend to consider revisions to the agency’s risk-based net worth rule, credit unions could extend more credit in their communities if the NCUA had the ability to fully define which credit unions, if any, should be subject to the risk-based net worth requirement. The NCUA should also have the authority to allow qualifying forms of alternative capital to count as net worth for all credit unions.
- Permit all credit unions, not just multiple common-bond institutions, to add underserved areas to expand access to financial services for the unbanked and underbanked.
- Provide credit unions with more flexibility to extend credit to small businesses to fuel economic growth; for example, by relaxing the statutory lending limit constraining credit union loans to small businesses and exempting one to four unit, non-owner occupied residential loans from the statutory limit.
In closing, the NCUA remains committed to providing regulatory relief for the credit union community in compliance with the Federal Credit Union Act and streamlining and modernizing the operations of the agency, while focusing on our prime role as a prudential regulator. We also stand ready to work with you and your colleagues on your legislative priorities.
I look forward to your questions.