WASHINGTON — Mark McWatters, nominee for the NCUA board, told a congressional committee on Thursday the possible overregulation of small credit unions and risk-based capital requirements are two of the greatest challenges facing credit unions that he wants to examine further.

Senate Banking Committee Chairman Tim Johnson asked McWatters what opportunities and challenges he sees for credit unions.

“I think the greatest opportunity for credit unions is to continue what they're doing now – 96 million Americans in credit unions – they're growing. Their loan base is growing and the like,” said McWatters during the Senate Banking Committee nomination hearing on Thursday.

“One opportunity is particularly for low-income credit unions and to expand their mandate to those Americans who are under-banked and unbanked. There's opportunity there. Those folks need financial services and they need financial services at a reasonable rate,” he added.

McWatters, President Obama's choice to replace Board Member Michael Fryzel, said the principal challenge is to look to the future and anticipate the next systemic shock to the financial system.

“If you roll the clock back six years, seven years, the talk about overconcentration of mortgage backed securities on the books of a financial institution, the too big to fails or the large corporate credit unions was largely non-existent,” he said. “It was there. It was hiding in plain sight.”

However, McWatters said sounding the alarm on potential problems too far in advance is not always the best strategy.

“If you're always crying wolf, you'll be considered a flake so you need to exercise judgment carefully and judiciously,” he said.

McWatters highlighted the overregulation of small credit unions as an area of concern.

“NCUA has made some progress in this area – I think more work though needs to be done. If I'm confirmed for this position, it's an area I want to look into,” he said. “I want to talk to credit unions. I want to talk to the NCUA. I want to reach an independent analysis myself as to whether small credit unions are regulated or not.”

The NCUA proposed risk-based capital requirements at the agency's January board meeting. McWatters said a risk-based system makes sense philosophically for credit unions.

“The devil is in the details,” said McWatters, who added that he wants to look further into the issue.

Sen. Elizabeth Warren, a member of the committee, expressed her full support behind McWatters during the hearing.

“I worked closely with Mark on TARP oversight and he was always smart, thoughtful and principled and I strongly support to the credit union board,” she said.