NCUA Chairman Hood Discusses Priorities with CA CUs

National Credit Union Administration (NCUA) Chairman Rodney Hood discusses issues with California credit union leaders at Provident CU on Monday.
National Credit Union Administration (NCUA) Chairman Rodney Hood discusses issues with California credit union leaders at Provident CU on Monday.

Member credit unions of the California Credit Union League met with National Credit Union Administration (NCUA) Chairman Rodney Hood at Provident CU in Redwood City on Monday, where he provided attendees with an update on what he’s been working on since taking the office four months ago and outlined some of his priorities.

Hood reiterated his regulatory philosophy of effective, but not excessive, regulations — and looking at opportunities to reduce the regulatory burden.

This is the chairman’s first trip to California since being appointed. He’ll also be speaking at the National Association of State Credit Union Supervisors’ (NASCUS) “2019 State System Summit” later this week on how the NCUA and state regulators can continue to work together and better harmonize the work they do in tandem. The NCUA and NASCUS will be signing a partnership agreement around shared exams.

RBC, CECL, BSA, and Anti-Money Laundering
Hood discussed a wide range of topics, including the proposed delay of the Risk-Based Capital (RBC) rule and the agency’s objectives during the delay, including issuing a proposed rule for supplemental capital for RBC purposes by year-end, addressing asset securitization, and evaluating whether a community bank leverage ratio equivalent should be integrated into NCUA’s capital standard.

 The RBC rule delay will also allow credit unions ample time to implement the Financial Accounting Standards Board’s (FASB) current expected credit losses (CECL) accounting standard. The chairman indicated the general counsel at NCUA assured him that credit unions don’t have to recognize those losses in year-one; credit unions will be able to phase in the day-one adverse effects on regulatory capital over the course of years. The chairman expects a proposed rule on this in early to mid-2020.

Hood also said he is looking at Bank Secrecy Act (BSA) and anti-money laundering regulations. He sits on task forces that discuss these issues and recognizes the burden. He has asked the U.S. Treasury Department for data showing how many suspicious activity reports (SARs) credit unions have submitted that resulted in convictions. He has gone on record in meetings with the Senate Banking Committee and House Financial Services Committee saying the $10,000 threshold needs to change.

Cannabis, Exams, Cybersecurity, and Innovation
The chairman also acknowledged the comments he made recently, stating credit unions in states where marijuana is legal will not be sanctioned by the agency for providing services to marijuana related businesses (MRBs). NCUA should be concerned about the safety and soundness of credit unions and protecting the share insurance fund, and it should not micro-manage a credit union, he said. Hood advised credit unions that choose to serve the industry to follow the Cole Memo. He acknowledged the Department of Justice is concerned with different issues.

Regarding exams, he said he does not believe in a one-size-fits-all approach and that exams should be risk-tailored appropriately based on size and complexity. He understands more clarity is needed around the difference between guidance and rulemaking, and that no credit union should be written up based on “guidance” — that there should always be a cited rule.

Hood talked about the importance of cybersecurity and protecting credit union members’ data. He has created a new position (senior advisor to the chair for cybersecurity) that will not only advise the chairman but also the industry, as well as communicate best practices through a newsletter the agency will be producing, speaking at conferences, and working with examiners.

The chairman is interested in innovation and fintech while ensuring credit unions remain safe and competitive and have a regulatory framework that allows and supports innovation. In early 2020, Hood will be launching an Office of Innovation and Access.

The ‘Underserved,’ PAL, and FCU Loan Term Limits
A comment was made about the chairman’s recent statements about a focus on serving the underserved. However, based on examinations that credit unions have had, when they go deep in credit or do other things to help this segment of members, they are getting written up or told they can no longer work in that area. The suggestion was made that the agency create a matrix based on the health of the credit union and how deep they can go in credit. Credit unions want to do more, but then they get bad exams when they do.

The chairman responded that as long as the credit union’s balance sheet, risk tolerance and capital adequacy support the activity, the NCUA should not micro-manage the credit union. He will take this comment back to the agency and look into it.

The NCUA is also looking at more ways to serve the underserved, including a new Payday Alternative Loan product that is expected to be on the NCUA Board’s September agenda and will incorporate credit building and financial coaching components. Hood is also interested in the use of alternative credit data.

In response to a question about updating the federal credit union loan term limits, the chairman said this issue is on his list — but it has not risen to the top. He said based on this feedback he will raise it higher.


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