February 7, 2013
National Credit Union Administration (NCUA) Chairman Debbie Matz hosted a town hall with Consumer Financial Protection Bureau (CFPB) Director Richard Cordray Tuesday, addressing topics that included upcoming proposals, finalized rules and examinations.
Among the issues addressed by the NCUA were:
- Interest rate risk (IRR) continues to be the No. 1 risk that credit unions are facing. In the current environment, rates could rise quickly and abruptly. Due to this risk, credit unions should ensure that they have adequate policies in place to address IRR, consistent with their size, portfolio, and the requirements laid out in the IRR Rule issued by the NCUA.
- Liquidity Risk is another area of risk that credit unions should be aware of. Matz stated that examiners are going to review credit unions' contingency funding plan, which will play a role in the “L” portion of their CAMEL ratings. The NCUA will be looking for credit unions to have an established relationship with reliable sources of contingency liquidity (especially larger credit unions).
- Concentration Risk will continue to be essential to the safety and soundness of credit unions.
- The NCUA has received many requests and recognizes the importance of providing additional guidance on rules that have been issues, such as the recent TDR rule. The NCUA is working on writing guidance that will help credit unions better comply with the TDR requirements.
- Matz urged credit unions to reach out to their supervisory examiners- beyond the scope of their examinations. Matz indicated that the supervisory examiners are great resources for credit unions to reach out for help understanding what is expected from them in accordance with different regulations.
Keep an Eye Out For…
- America and Military Saves Week (Feb. 25–March 1). This is a weeklong promotion for healthy saving behaviors. The NCUA will have a video available on its website and encourages credit unions to share the video with their members.
- The NCUA will be issuing a derivatives proposal during 2013. The NCUA staff is currently still working on it, but the NCUA does recognize that this may be a sufficient way for well-run credit unions to hedge interest rate risk.
- Larry Fazil discussed the emergency liquidity proposal that is out. He indicated that this area is still being heavily reviewed, including if the FHLB can or will be considered an acceptable source of emergency liquidity.
- The NCUA also stated that they will be reviewing the MBL rule this year to determine if there are areas where the rule can be updated/modernized.
Director Richard Cordray of the CFPB was allotted time to answer questions from participants covering a broad range of topics. Those currently most important to credit unions included:
- Director Cordray explained the scope of the examinations that the CFPB is currently conducting. Cordray stressed the point that the CFPB only examines financial institutions over $10 billion in assets and also examines non-bank financial service providers (pay day lending, mortgage brokers, and credit reporting agencies). The CFPB does have the ability to conduct a joint examination with the NCUA or a state supervisor, but is not planning on doing so at this time.
- Cordray also expressed the desire of the CFPB to provide consistent examinations across the board. He wants to ensure that examiners from different regions are providing clear and consistent answers and feedback when conducting an examination. Cordray also stated that the CFPB will work very closely with other agencies to ensure that the examinations are consistent.
Recently Issued Rules
- Cordray received multiple questions regarding the remittance transfer rule. Some of the concerns expressed were the same that many credit unions have already expressed- no longer being able to provide remittance transfers. Cordray stated that safe harbor (100 transfers) is not being changed at this time, although it can be evaluated at a later date. Also, Cordray stated that we could expect to see the final rule sometime in late spring or early summer, with an implementation date 90 days after the final rule is issued.
- Cordray and his team did stress that they issue “plain English” guides on the rules to help institutions better understand how to comply. However, he does expect that further guidance may be needed and will look into issuing it as needed.
In the Future...
- In addition to the Ability to Repay final rule, the CFPB also issued a proposal for comment to look at exempting smaller credit unions from the rule. The exemption is currently proposed for credit unions that are under $2 billion in assets, originate fewer than 500 loans, and keep the loans originated in their portfolios. Cordray encouraged credit unions to comment on this proposal.
- Cordray also indicated that the Bureau will be looking into student loans, general purpose reloadable cards, and overdraft usage. Also, Cordray is looking forward to clarifying how financial institutions can work with law enforcement and other agencies to help members dealing with scams and elder financial abuse.
The town hall meeting was recorded will be available on the NCUA’s website.
Questions? Contact the Compliance Hotline: 1.800.546.4465, email@example.com.