Todd Harper testifying before the Senate Banking Committee on Aug. 3, 2021.
During Tuesday's Senate Banking Committee hearing, NCUA Chairman Todd Harper made a number of legislative requests to Congress, including to give the NCUA enforcement authority over third-party vendors, allow the NCUA board to proactively manage the Share Insurance Fund and to provide the agency with emergency liquidity through the Central Liquidity Facility.
The Senate Banking Committee's meeting titled "Oversight of Regulators: Does our Financial System Work for Everyone?" did little to address the topic, beyond the opening statements from Committee Chair Sherrod Brown (D-Ohio). "We need no-fee accounts and allow everyone to open a bank account and have control over their money," he said. "We need to close the loopholes that allow so-called fintech firms to play by a different set of rules that banks and credit unions [follow] wading into unfair competition putting consumers' money at risk."
FDIC Chairman Jelena McWilliams, Acting Comptroller Michael Hsu with the Office of the Comptroller of the Currency and Harper all testified before the committee.
While Harper fielded a handful of questions from committee members concerning interest rates, risks associated with climate change and diversity, equity and inclusion efforts at the agency, Harper's 22-page written testimony, included in the meeting's records, revealed his four legislative priorities to Congress.
Share Insurance Fund Improvements
As a result of elevated growth in insured shares through the first quarter of 2021, the NCUA reported the equity ratio for the SIF sits at 1.22%, which is two basis points from the statutory minimum of 1.20%. If the 1.20% threshold is hit, the NCUA must implement a restoration plan. Harper has warned before that credit unions should expect to be charged a premium if that occurs.
In his comments, Harper asked Congress to change the statutory provisions in the Federal Credit Union Act to enable the NCUA board to proactively manage the SIF. Harper proposed the following changes:
- Increase the Share Insurance Fund's capacity by removing the 1.50% statutory ceiling on its capitalization.
- Remove the limitation on assessing premiums when the equity ratio exceeds 1.30%, granting the NCUA board more discretion on the assessment of premiums.
- Institute a risk-based premium system.
Vendor Authority
Harper wants Congress to give the NCUA examination and enforcement authority over third-party vendors, such as CUSOs. Currently, the NCUA may only examine CUSOs or third-party vendors with their permission. Harper said, "While there are many advantages to using these service providers, the concentration of credit union services within CUSOs and third-party vendors presents safety and soundness and compliance risk for the credit union industry."
He added that CUSOs accounted for more than $300 million in losses to the SIF between 2008-2015. "As such, the NCUA requests the comparable authority as our counterparts on the Federal Financial Institutions Examination Council to examine third-party vendors," he said.
Central Liquidity Facility
When the CARES Act was implemented in the early day of the pandemic, it contained a provision that gave the NCUA tools to ensure continued liquidity of the credit union system. This provision is set to expire at the end of 2021. Harper said, "The NCUA respectfully requests that Congress make the enhancements to the NCUA's CLF granted in the CARES Act permanent for the stability of the credit union system moving forward."
Before the CARES Act, the CLF only had authority to borrow up to 12 times the subscribed capital stock and surplus of the CLF. The CARES Act allowed that multiplier to increase to 16. Harper noted that a number of credit unions have joined the CLF since the pandemic began and "it is important that these temporary enhancements to the CLF are made permanent."
Community Development Revolving Loan Fund
In his submitted remarks, Harper said the demand for CDRLF grants are regularly exceeding supply, especially during the pandemic where low-income credit unions and MDIs have been disproportionally financially impacted. "As such, I respectfully request that the Congress increase CDRLF appropriations to $10 million. With more funding, the agency could increase the number of credit unions receiving grants and increase the size of the grants it makes, deepening the program's impact in underserved communities."
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Editor-in-Chief at CU Times. To connect, email at [email protected]. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.
