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|L-R: Larry Fazio, Director of the Office of Examination and Insurance for the National Credit Union Administration (NCUA); Teresa Freeborn, CEO of Xceed Financial FCU and Chairman of the California Credit Union League; and Bill Hampel, Interim President and CEO of the Credit Union National Association (CUNA)|
The Credit Union National Association (CUNA) hosted a panel discussion on the proposal last week at the America’s Credit Union Conference in San Francisco. The session drew a large crowd of credit union leaders who were ready to engage in the discussion. The panel included NCUA Director of the Office of Examination and Insurance Larry Fazio, as well as Bill Hampel, interim president and CEO of CUNA, and top CUNA officials Eric Richard, Mike Schenk, Ryan Donovan, and Mary Dunn.
Each of the panel members spoke on the proposal from their respective points of view and then opened the discussion to questions from the audience.
On-Site Dialogue: CUNA and NCUA
Schenk, the interim chief economist for CUNA, commented, "The more we looked at it, it is not just a solution looking for a problem, it is a bad solution looking for a problem.” He said the rule is not necessary since there were only a small number of credit union failures during the financial crisis. The National Credit Union Share Insurance Fund stayed above 1.2 percent, whereas the Federal Deposit Insurance Corp.'s bank fund turned negative during the economic downturn.
Schenk added that the proposed rule ignores the impact to credit unions’ capital cushions, and the agency’s estimation of an increased capital requirement of $63 million is flawed. "We believe credit unions would need to raise $3.5 billion to $4.5 billion in capital,” he said.
Ryan Donovan, senior vice president of legislative affairs for CUNA, commented on the congressional efforts of CUNA and state leagues, which resulted in a letter supported by 75 percent of House legislators. "No one in Washington can remember a letter getting such support,” Donovan said. "The congressional response has been outstanding, and I expect it to continue. There is a lot of interest in this rule."
Mary Dunn, senior vice president and deputy general counsel for CUNA, reiterated that the RBC proposal is "one of the most significant" rules credit unions will see in the next 10 years. CUNA’s efforts for a better rule persist, and the association’s leaders “continue to meet with every official at NCUA that had anything to do with developing this proposal.”
Fazio discussed the genesis and justification for the rule. “Setting aside the corporates, we agree the system weathered the economic crisis well,” Fazio said. He noted that the agency recognizes there is some fine-tuning needed in the RBC proposal, particularly the areas of real estate loans and concentrations.
Regarding the impact to credit unions, Fazio said: “The cushion is not a function of the rule, but how credit unions want to manage. However, we understand the cushion concerns are real.”
He said the agency is listening. “We are not going to make all the (suggested) changes, but we will continue to do research, including listening sessions. We are getting good feedback.”
League Chairman Comments
During the audience participation forum, Teresa Freeborn—CEO of Xceed Financial FCU and chairman of the California Credit Union League—said she felt "the whole thing is rushed” when it comes to NCUA’s RBC proposal. “What is the rush? What is the panic? Over 2,000 letters is pretty amazing. Why not rewrite the rule and give us a chance to comment one more time?"
Fazio replied, "Even before the GAO (Government Accountability Office) study in 2010, we had on our agenda a desire to modernize the capital rules. The timeline of proposal to final will be as long as it takes to get it right. We have a lot of analysis to do. There were ideas we have not thought of. Once we do have a final rule, implementation will be an appropriately long time period. It is not lost on us that you all need time to adjust your strategies."
Regarding a second proposal and opportunity to comment, Fazio said he didn’t know if there will be such substantive rule changes that NCUA would be required to issue a second proposal. "Probably not, at this point—but I do not control that," he said.
Later in the discussion, Fazio noted that NCUA Board Chairman Debbie Matz recently said a second proposal is not likely. “But that could change too,” he said.
Near Term Action
The California and Nevada Credit Union Leagues continue to work with CUNA and other state leagues in pushing for a second proposal from NCUA, whether or not the agency is required to submit one.
The Leagues are also engaged with other leagues as they prepare for more upcoming NCUA Listening Sessions similar to the one held in Los Angeles in late June, and continue to raise numerous concerns with the proposed RBC rule.
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