SAN FRANCISCO–State regulators here got an update from NCUA on everything from plans for a subordinated debt rule and expanded powers for CUSOs to what to do about disclosure-related rules around mergers—where some regulators want to see conflicts in the rules addressed.
Speaking to the NASCUS State System Summit here, Lara Daly Simms, deputy general counsel with NCUA, said what the agency is most closely watching in the short term is the court’s decision on a lawsuit over its field of membership rule. Bank groups’ filed a lawsuit challenging the agency’s new rules and alleging they are too broad and violate the Federal Credit Union Act.
That decision is expected before the end of August.
“I think it’s a pretty good bet, and I’m not a betting person, we’ll win two and lose one (of the challenges),” said Daly-Simms. “I am very optimistic we will prevail on the rural claims.”
Here are other topics touched on by Daly-Simms:
Daly-Simms said credit unions should look for the agency’s proposed rule on subordinated debt before the end of the year.
“We have been working on this since end of 2015; it’s a pretty heavy lift,” she said. “It’s going to be a heavy rule for credit unions to digest. As we’re contemplating it now, some people will be happy about it. The bankers are going to hate it, we know that. Some credit unions will say that what we are anticipating requiring on this will be somewhat onerous. So, we will be interested to see how much subordinated debt is issued once this goes final. We want to sync it up with the effective date of the risk-based capital rule. For non-LICUS, the only thing they can use subordinated debt for is for RBC purposes.”
Proposed CUSO Rules
Daly-Simms said CUSOs are in the “top tier” of issues NCUA wants to address from a regulatory standpoint. But that doesn’t mean any proposal will be coming soon.
“It’s fair to see you will not see action on a CUSO rule for this year,” Daly-Simms said. “It’s possible for next year. This proposal would allow a CUSO to make any loan that a credit union could. We have gone back to the drawing board; I’m not sure the newer board wants this.”
As part of NCUA’s emphasis on greater disclosures, Daly-Simms said the bylaws modernization requires any FCU with a website to post their bylaws, including the names of who serves on committees. “We want information out there.”
Daly-Simms said NCUA strongly supports disclosures to members around proposed mergers. “We’ve never had a credit union fail because it had to disclose a merger,” said Daly-Simms.
Some state regulators have pushed back on NCUA’s requirement around merger disclosures, which applies to any federally insured institution, because the agency’s rules conflict with rules already in place in the respective states.
Daly-Simms urged opponents of the rule to provide feedback in 2020, when it comes up as part of the agency’s annual review of one-third of its rules.