Keep the dialogue with NCUA moving forward

first_img 26SHARESShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblr,Greg Michlig Greg Michlig joined the New Jersey Credit Union League as President/CEO in May of 2013. He has a strong background in the credit union, association and related financial services … Web: www.njcul.org Details Rules and regulations are important in everything from our social interactions with one another to the complex business guidelines and measures enforced by regulatory agencies across our country. Those agencies, including the National Credit Union Administration, play an important role in creating an environment in which expectations are set and monitored to keep bad actors from damaging the marketplace.While, in the wake of the recent financial downturn and the ensuing increased regulatory oversight, many express ire with the prudential regulator, most will also acknowledge that the NCUA has a difficult job to do in striking balance between supervision and market suppression through over-regulation. We recognize the importance of safety and soundness in the credit union system and the significance of NCUA’s function.However, regulatory burden is real and credit unions of all sizes are feeling the pinch. Managing compliance matters and participating in the examination process draws significant resources for credit unions at all levels of complexity. Those resources could be redeployed in areas dedicated to growth and consumer benefit.This is where increasing attention on the industry dialogue with NCUA is of utmost importance. It is difficult to fully understand and gain clarity from an agency when conflicting messages are delivered on issues and within levels of the organizational structure.For example, the recent 18-month exam issue was first struck down, almost immediately, by NCUA spokesman Ben Hardaway. Credit Union Journal quoted Hardaway as stating, “The current 12-month exam cycle has proven to be both more appropriate and more effective than an 18-month cycle,”. Credit Union Journal goes on to state that, according to Hardaway, credit union financial stability changes too quickly to allow for the risks that can occur when an institution goes longer than 12 months without an exam.This swift and seemingly definitive response was met with concern from credit unions, trade associations and even NCUA Board Member J. Mark McWatters. In a response, also posted to the Credit Union Journal, McWatters stated the following, “That NCUA would scuttle this request without debate among the board offices further evidences the lack of transparency and collegiality within the agency. As we all know, more than 70% of NCUA’s operating budget consists of examination and travel related costs, and any reasonable suggestion regarding how to better manage the inexorable increase in these costs merits thoughtful reflection. NCUA seems to have forgotten that it’s not 2008, but, instead, 2015 and that the credit union community — in NCUA’s own assessment — is strong and resilient. That the top-tier of credit unions require full-tilt examination every 12 months is worthy of challenge and rigorous debate.” Mr. McWatters goes on to state that he is not necessarily supporting the proposed move to the 18-month exam cycle, but acknowledges the need for additional conversation on the topic before moving forward.In an additional twist, Larry Fazio, director of the NCUA’s Office of Examination and Insurance, later cited a need for technological improvements to facilitate moving to an 18-month examination cycle. With implementation of a new system, which is currently being evaluated, on-site time at credit unions would be reduced.Understanding that there is now stated openness to discuss the matter further, I would offer that an earnest request for dialogue from the NCUA at the outset would have been much better received within the credit union community. It is my hope that this is a stepping stone to more robust interaction between the agency and credit unions along with their representative associations.For example, there are a number of New Jersey credit unions that offer Taxi Medallion Loans. As NCUA Chairman, Debbie Matz, stated in her Supervisory Letter—Taxi Medallion Lending in April of 2014, “Taxi medallion lending is a valuable member service provided by certain credit unions with expertise in this form of member business lending which entails some unique risks.” Understanding these risks and following guidance is to be expected for any credit union engaging in such loans. In addition, focus on the fact that this line of lending is a valuable member service, should hold an equitable share of the discussion. It is my hope that prior to NCUA action relative to this area, credit unions are engaged in a discussion around strategy and workable solutions to any concerns that may exist.It may be naïve to suggest that the regulator and the regulated can exist in an environment relatively free of tension. In fact, it is probable that such an environment wouldn’t be satisfactory for any parties involved. That said, through continually taking steps towards open and transparent discussion of key issues, better clarity around conflicting points of view can be gained by all those involved. With such understanding, I believe that together, we can advance the credit union movement to new heights in delivering value to our members and the many additional consumers who will look to credit unions as their best financial partners in the days, months and years ahead.last_img

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