61% of FCUs Qualify for RegFlex

ALEXANDRIA, Va.-Recent Call Reports and examination cycles have indicated that 3,650 federal credit unions are eligible for RegFlex treatment. RegFlex is a program initiated by NCUA Chairman Dennis Dollar to reward well-managed federal credit unions with a reduction in regulator burden. RegFlex eligible credit unions represent 61% of the 5,978 federal credit unions across the United States. The program particularly helps smaller credit unions with 65%, or 2,363, eligible credit unions falling below $20 million in assets. These credit unions are also more likely to be negatively impacted by regulatory requirements due to resource limitations and compliance costs. Dollar billed RegFlex as an “incentive for diligent and prudent management, coupled with its emphasis on maintaining a strong financial position that helps protect both the members and the taxpayers, has proven to be quite valuable for credit unions and is a positive inducement to better performance which also serves NCUA well as the supervisory agency.” According to the chairman, feedback from credit unions on the RegFlex program has been very positive. “Credit unions are always frustrated by a `one size fits all’ regulatory approach because they recognize, and we should as well, that each credit union is different and the risk factors are different as well. RegFlex recognizes those differences and, for the first time in NCUA’s regulations, incorporates those differences into a more risk-based approach to the application of regulations. RegFlex has been well received in the credit union community, but, interestingly, it has also been very well received throughout NCUA because it provides a positive incentive for better credit union financial and management performance,” Dollar said. NAFCU Director of Regulatory Affairs Gwen Baker said, “We typically hear from credit unions when they are having problems with a regulation, and we have not heard anything about RegFlex in this regard, so that is a good news. During the comment period we did hear many positive comments from credit unions about the RegFlex proposal, so I am assuming credit unions that are eligible are availing themselves of the advantages of RegFlex.” RegFlex exempts credit unions with a minimum of 9% net worth and a CAMEL code 1 or 2 for two consecutive examination cycles from all or part of certain regulations not required by statute and unnecessary for safety and soundness purposes when applied to high net worth, well-managed credit unions. RegFlex eligibility can be revoked in whole or in part by NCUA based upon credit union performance trends. The rule also includes an application process for credit unions that meet one, but not both criteria. In addition to 3,646 automatically qualified credit unions, regional directors approved four waivers but denied three waiver requests in 2002. Dollar told Credit Union Times that the revised federal credit union investment regulation currently under consideration is one that the agency is “seriously evaluating” as a RegFlex possibility for certain investment authorities. “One of the best aspects of RegFlex is that the criteria is now firmly established in the NCUA rules and we can evaluate all future regulations as to whether they should apply to all federal credit unions or perhaps the RegFlex eligible credit unions should be exempted. This gives us some additional flexibility in considering new rules and perhaps avoiding a `one size fits all’ approach when it isn’t necessary,” Dollar concluded. [email protected]