CU Reg Improvement Act a Big Plus for CUs, Not So for Banks

WASHINGTON-The Credit Union Regulatory Improvement Act (H.R. 3579) was introduced to a chorus of cheers and boos as Congress drew to a close. Earlier this year, credit union and banking trade associations had been opposed to breaking out a separate regulatory relief bill for credit unions. From credit unions’ point of view the regulatory relief provisions were helpful, but they needed more to actually do battle with the banks. The bankers would not comment at the time on their reasons for opposing two separate regulatory relief bills, but it was speculated that limited resources played a role. However, with the addition of provisions for risk-based Prompt Corrective Action and an increase in the member business lending cap, credit unions are raring to go. The risk-based PCA provision is straight from NCUA Chairman Dennis Dollar, who had floated the idea in February during CUNA’s GAC and had a fluid back and forth with lawmakers about the proposal. The legislation currently has six co-sponsors including House Financial Services Committee Members Ed Royce (R-Calif.), Paul Kanjorski (D-Pa.), Steven LaTourette (R-Ohio), Carolyn Maloney (D-N.Y.), Brad Sherman (D-Calif.) and Joe Baca (D-Calif.). Sherman also promised to introduce legislation regarding secondary capital for credit unions. The issue was overlooked for H.R. 3579 because of the controversy surrounding it, including within the credit union community. In addition to the MBL and PCA provisions, the bill includes 12 of the 13 provisions from the Financial Services Regulatory Relief bill (H.R. 1375)-minus the Federal Home Loan Bank provision allowing privately insured credit unions to join the system. Also, the bill allows credit unions to lease property in underserved areas without the intention of ever occupying it and would raise the minimum MBL counted against the cap from $50,000 to $100,000. Finally, the bill would let NCUA decide whether a credit union with less than 6% net worth should be able to make MBLs. Bankers responded as would be expected, saying that the bill guts PCA and calling the MBL provision an “egregious power grab.” [email protected]