Federal Regulator Reps Address Opening of NASCUS Conference

ALBUQUERQUE, N.M. – Attendees of NASCUS’ 39th Annual Conference heard from representatives of the Federal Reserve Board and the NCUA on opening day of the four-day conference, Sept. 12-15. Federal Reserve Board Governor Susan Schmidt Bies touched on a variety of issues in her keynote address to the conference including the economy, corporate ethics, and consumer issues. Speaking to her first audience of state credit union regulators, Bies remarked that as a banking regulator she had something in common with her audience. Recalling that she joined the Fed board just as Enron was “busting loose,” and companies and organizations were under pressure to manage more carefully, Bies said, “We learned that poor management can still manipulate. They get the headlines, but there are many companies that do not. They are lacking a consistent culture of what’s right ethically, sound corporate controls, governance, and risk management.” If CEOs use a position of dominance negatively then shareholders lose while they personally may benefit, the Federal Reserve Board Governor said. NCUA Chairman JoAnn Johnson also delivered a keynote address on “Issues Facing the NCUA and Improving State/Federal Cooperation” that focused on credit union regulatory and small business lending issues. After informing attendees there was no news on a possible third member being named anytime soon to the NCUA Board, given November’s presidential election, and congratulating NASCUS on its efforts on behalf of the state-chartered credit union system – including lauding the leadership of president/CEO Mary Martha Fortney – Johnson discussed credit unions meeting a need for small business lending and recognized that NCUA used many ideas from the state credit union system as a model in crafting its own MBL regulations for federal credit unions. Referring to “honest misunderstandings” between state and federal regulators that can – and have – happened, the NCUA chairman said, “It’s important for the dual chartering system to continue so that states can continue to innovate and develop new ideas that move us all forward.” Continuing to focus on MBL rules, Johnson told attendees that NCUA “has no intention of squashing state MBL rules, and our rule is never final. We’re always looking for improvement. We’ll also review the MBL rule as we review one-third of all rules every year in order to update them, so keep up the good work.” Switching to the topic of alternative capital, Johnson acknowledged that NASCUS and the NCUA have a different approach to alternative capital, and said “we agree there are key unresolved issues and a lack of consensus in the movement on the appropriateness and structure of alternative capital.” Johnson offered that a risk-based approach might stand a better chance of being approved by Congress. “A 5% leverage rather than a 7% leverage in a risk-based system has a better potential for success in Congress,” she said. -