"As part of the larger government-wide effort, the NCUA will continue bolstering its cybersecurity posture and provide guidance and resources to assist credit unions with strengthening their cyber defenses – including grants and completing a pilot project to harmonize IT and cybersecurity exam procedures," he said.

Harper laid out three legislative actions to the committee that he said would help the NCUA:

1. Examination and enforcement authority over third-party vendors;
2. Greater authority to proactively manage the Share Insurance Fund; and
3. Permanently adopting enhancements to the NCUA's Central Liquidity Facility.

Concerning the proposal for examination and enforcement authority over third-party vendors, such as CUSOs, Harper said, "The continued transfer of operations to Credit Union Service Organizations and other third parties diminishes the NCUA's ability to assess risks within the system, leaving thousands of credit unions, millions of their members and billions of dollars in assets potentially exposed to unnecessary risks. Congress should close this regulatory blind spot."

In a letter sent to committee members, NAFCU opposed such a move by the agency and asked members to ignore the draft legislation titled "NCUA Oversight of Third Party Vendors Act."

"Instead of granting NCUA vendor examination authority, Congress should encourage the agency to use the FFIEC and gain access to the information on exam findings on companies that have already been examined by other regulators. This would address (the) NCUA's concerns without creating additional costs to credit unions and increasing regulatory burdens on credit unions and small businesses," the letter stated.

While also opposed to this idea, CUNA saw some areas where this authority could be a good thing for credit unions if the authority were tightly focused. In its letter to committee members, CUNA said, "We would like to work with the Committee to tailor this legislation so that it targets high risk areas such as cybersecurity and anti-money laundering relationships, and ensures that credit unions do no pay higher direct or indirect costs as a result of the agency exercising this new authority."

For the Share Insurance Fund, Harper stressed the need to charge credit unions a premium as the equity ratio finished 2020 at 1.26%. According to the Federal Credit Union Act, a premium could be charged if the equity ratio falls below 1.20%, or if the NCUA board projects it will drop below that number in six months. Harper appeared to want to bolster reserves potentially higher than that. He said, "Adopting a countercyclical approach to charging premiums would allow for an increase in insurance reserves during economic upturns to cover losses during downturns."

CUNA and NAFCU both opposed such a move. In its letter, NAFCU stated, "The fact that the SIF has fared so well during the past 12 months provides ample evidence that the fund is strong and that credit unions were well-capitalized and had strong balance sheets entering the crisis."

Last March, Congress adopted several enhancements, as part of the CARES Act, to the Central Liquidity Facility that helped improve its membership and borrowing capacity. Harper said he wants lawmakers to make those enhancements permanent. "Because of these reforms, the CLF's borrowing capacity has grown greatly and four out of every five credit unions now have access to liquidity if other sources freeze up … it would strengthen the shock absorbers for future liquidity events," he said.

In their letters to the committee, NAFCU and CUNA both supported Harper on this measure.

Read More:

• Full text of NCUA Chairman Todd Harper's testimony filed into the record.
• CUNA's letter to House Financial Services Committee members.
• NAFCU's letter to House Financial Services Committee members.