NCUA Board Lowers NCUSIF's NOL; Gets Update on Reg Reform

ALEXANDRIA, Va.–During its meeting here, the NCUA board voted to slightly lower the Normal Operating Level of the NCUSIF and voted to publish the second report from its Regulatory Reform Task Force.

The addition of the item to the board agenda was made just ahead of the meeting, and its timing is important to credit unions—where the Normal Operating Level stands on Dec. 31, 2018 will determine whether credit unions are paid a dividend from the NCUSIF in 2019. Had the item not been added it would not have been considered until its January 2019 meeting and would have had no bearing on any 2019 payout.

NCUA Board

The NCUA board at Dec. 13 meeting.

The NCUA board, at the same Sept. 2017 meeting at which it voted to merge the Temporary Corporate CU Stability Fund with the National Credit Union Share Insurance Fund, voted to increase the Normal Operating Level of the insurance fund to 1.39%. 

Now, NCUA staff, said during the board meeting, new models indicate that even with a moderate recession at some point in the next five years, the numbers show the NOL can be lowered slightly to 1.38% effective immediately.

Whether a distribution from the NCUSIF to credit unions is made will not be determined until February of 2019 at the earliest, after all audited statements for the Fund are reviewed. Any distribution would then follow.

In other actions taken by the NCUA board: 

Regulatory Reform Task Force

The updated report from NCUA’s Regulatory Reform Task Force was approved by the board. The Task Force was formed in March of 2017 and charged with identifying areas where regulations could be reformed. It was created following president Trump’s Executive Order 13777 even though NCUA, as an independent agency, is not required to comply with executive orders.

As staff testified during the board meeting, the Task Force divided regulatory proposals into three tiers, with the first tier representing those that would “get the biggest bang for the buck in shortest amount of time.” Of the 16 regulations reviewed and modified in Tier 1, 10 have been completed and numerous others are in the queue for completion, staff told the board. 

“This is an example of regulatory transparency. We looked at a problem, a potential set of issues, and (NCUA staff) went through all of our regulations and placed them into these matrixes and we prioritized to give us the most bang for the buck and to do as quickly as possible,” said NCUA Chairman J. Mark McWatters. “This is not a secret. We are not only telling the credit union community, we have also asked for comment. We listened to those comments and the credit union community had some really good points. So we reprioritized. To me, this is exactly what federal bureaucracies should be doing and should not be steeped in mysticism. This is our road map for 2019.”

Report 2 of the Regulatory Reform Task Force can be found here.

Update from Blockchain Working Group

Separately, the NCUA board also heard a report from its Blockchain Working Group, which was created in July 2018 as a means of monitoring emerging financial technologies, such as cryptocurrencies and blockchain, as well as fintechs, artificial intelligence, and more. 

Agency staff told the board it is working to ensure credit unions are able to “embrace financial technologies” in order to compete. Staff added there are plans to reach out to credit unions on related issues in the first quarter of 2019. 

NCUA Blockchain Briefing

NCUA staff update Board on blockchain efforts.

NCUA has created an email address, blockchain@ NCUA.gov, that is to be used as a “conduit” to let the agencies know how they are using blockchain projects and to offer feedback.”

“We set up this working group to be able to explain and help us to understand how blockchain and this idea of a distributed ledger system could interface with the credit union community and what is the future of this,” said McWatters. “If this is the greatest thing in the world and credit unions don’t understand it and NCUA doesn’t understand, that’s a recipe for a disaster. You have to admit what you don’t understand. No one in the credit union community should think NCUA is not paying attention to these issues. Part of our budget is going to issues like this, items the credit union community may not see an immediate return on. But we are laying the foundation for a safe and sound credit union community as financial services evolve.”

NCUA Board Member Rick Metsger added that understanding blockchain was also critical to understanding emerging risks from areas such as money laundering using blockchain and other technologies. 

The Briefing on Blockchain and Distributed Ledger Technology report can be found here.

Technical Amendments

The board voted 2-0 to approve technical amendments to NCUA rules that made several changes to correct minor errors and inaccurate citations, as well as wording changes to reflect organizational changes at NCUA. 

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