House committee to request regulatory relief suggestions; CU Coordinating Council may convene

WASHINGTON-CUNA learned that the House Financial Services Committee plans to request a limited number of suggestions for regulatory relief from each of the federal financial services regulators. CUNA President and CEO Dan Mica wrote his board recommending that CUNA, via NCUA and in consultation with other credit union groups, send four initiatives down to the Hill in time for consideration in a regulatory relief bill. Committee Chairman Mike Oxley (R-Ohio) is heading the effort in Congress. “From CUNA’s perspective, we have been given a head start on this task not only because of our advance notice of the Committee’s effort, but also because of the efforts of the Renaissance Commission and [CUNA's] Governmental Affairs Committee,” Mica’s letter read. “The Commission provided a number of suggested changes as part of the input it gathered from credit unions for its report, and the GAC subsequently prioritized those suggestions. Taking into careful consideration the criteria that the Hill will use in judging the appropriateness of each of the proposals it receives, our staff have [sic] compiled the limited number of recommendations as requested for the consideration of the NCUA and NAFCU in responding to the [House Financial Services] Committee’s request.” After first informing Acting NCUA Chairman Dennis Dollar of the Financial Services Committee’s intent, Mica said he planned to consult with NAFCU President and CEO Fred Becker through the Credit Union Coordinating Council to reach a consensus on the issues. Financial Services Committee staff asked that all recommendations come through the regulatory agencies. NAFCU Communications Manager John Zimmerman and sources at CUNA confirmed that Mica and Becker have already been in communication on the subject, though no date is set yet for the Coordinating Council to convene. “The Coordinating Council is the perfect venue to trade intelligence about what’s going on up on the Hill,” Zimmerman said. “The likelihood of credit unions achieving their objectives is significantly enhanced when there are open discussions between the interested parties,” NAFCU Senior Vice President and General Counsel Bill Donovan commented. NAFCU’s Becker was on travel and unavailable for comment. CUNA already has existing policy on each of the four issues addressed in the letter, Mica wrote. A CUNA spokesperson added that the four topics would not preempt the Renaissance Commission’s final decisions. NAFCU declined to comment on any of Mica’s suggestions until it learned more details about them. The first of these is expanded investment authorities for federal credit unions in high credit quality, non-government debt securities. Mica listed several private debt instruments he felt would be appropriate for credit unions, including commercial paper, corporate notes, non-agency mortgage-backed securities, and asset-backed securities. “[T]he financial marketplace continues to introduce new investment instruments, so providing NCUA with the regulatory authority to consider appropriate credit union investments is the appropriate course of action,” the letter read. He also noted that the change would bolster safety and soundness. Another suggestion the CUNA chief made was to permit federally insured credit unions to issue uninsured membership shares to qualify as net worth. Mica’s explanation: “With the recently enacted prompt corrective action provisions in the Federal Credit Union Act, federally insured credit unions may need to augment the acquisition of net worth by earnings retention. Permitting credit unions to raise additional net worth from members in a way that does not compromise the cooperative ownership structure and governance would provide additional protection to the National Credit Union Share Insurance Fund [i.e. an additional buffer between a credit union's losses and the insurance fund].” The ability for healthy credit unions to voluntarily merge was taken away with the passage of H.R. 1151, the Credit Union Membership Access Act. Mica advocated that credit unions should request that this power be restored in the regulator relief legislation. He provided several instances in which he believes credit unions should be allowed to merge, but under current law cannot or have to jump through additional regulatory hurdles. Finally, Mica suggested that NCUA be given the authority to determine the maximum amount a federal credit union can invest in a credit union services organization (CUSO). In his letter, Mica noted that the authority of credit unions to invest in CUSOs was granted in 1977, establishing 1% limits that have not changed since. The CUNA CEO suggested that NCUA be given the authority to determine appropriate limits on CUSO loans and investments given safety and soundness considerations. Mica did not want to comment on his letter to the board at this time. “Although the Board has yet to act on the GAC’s recommendations after its review of the Renaissance Commission report, I am sure you will agree that by working with the NCUA and NAFCU to provide this information to the Hill, we are taking advantage of whatever opportunities may occur to implement components of the Renaissance Commission report,” Mica’s letter to the CUNA Board concluded. “I want to assure you that although the House Financial Services committee has indicated that it will only include three recommendations from each regulator, CUNA is committed to exploring additional changes with both NCUA and appropriate federal lawmakers.” [email protected]