It’s Mandate Relief Monday!

November 26, 2012 at 7:00 am Leave a comment

Thank you for taking a break from your Cyber-Monday shopping to take a gander at my blog.  I am here to announce that today is shaping up as NCUA’s Mandate Relief Monday.  Maybe it’s not as exciting as Cyber-Monday, but I figure it’s safe to talk about now that the Tryptophan has worn off.  I don’t think NCUA’s proposals to save credit unions money, as modest as they may be, have gotten the attention they deserve and with a series of comments due today, this means credit unions could be exercising new powers by early next year.

  • For my money, the most significant of NCUA’s proposals is the one to introduce a more strenuous cap on the potential size of rural districts that credit unions are seeking to serve.  Currently, NCUA has capped the size of such districts at 200,000 persons.  I have never quite understood what was so significant about this number to begin with, and now NCUA is proposing that the size of rural districts will be capped at the higher of 200,000 persons or 3% of a state’s population.  In New York, this will mean that the size of such districts can be a little over 580,000 persons.  When one considers that credit unions have found it difficult to cost-effectively serve rural districts capped at 200,000 persons, this proposal can both aid credit unions that want to expand their membership and provide needed financial services to persons in these communities.
  • Treasury Inflation Protected Securities (TIPS) are a type of U.S. Treasury Security that adjusts for inflation.  NCUA is proposing to allow credit unions to invest in this product.  With NCUA so concerned about sudden shifts in the economy, this instrument seems to provide needed investment flexibility for credit unions not so much now but in the future.  Hopefully, this will be the first step in a series of measures giving credit unions greater investment flexibility.
  • NCUA is proposing to raise the threshhold below which a credit union is considered a small credit union from 10 to 30 million.  Considering that NCUA exempts so-called small credit unions from certain regulatory requirements, this one would seem like a no brainer.  The only concern I have heard is that NCUA should be careful not to make the threshhold so high that it becomes more reluctant to give small credit unions mandate relief on a case-by-case basis.
  • Finally, NCUA is seeking to codify its decision over the summer to start notifying credit unions that they are eligible for low-income credit designation and giving credit unions up to 90 days to accept this designation.  I have said in previous blogs that I do not understand why some credit unions have been reluctant to accept this designation, which, among other things, allows them to accept secondary capital and waives the Member Business Lending Cap.  Anything that NCUA can do to help eligible credit unions see the light is a step in the right direction, but the fact that not all eligible credit unions have chosen to avail themselves of this status in the first place is a poor reflection on the industry.

Black Friday Tealeaf Reading Begins

We are still a consumer driven economy, last I checked, so it is only natural that economists and economist want-to-be’s like myself review the weekend shopping numbers to gauge how the consumer feels about his or her economic prospects.  The good news:  total spending reached $59.1 billion, a 13% increase over last year.  The potentially bad news:  have consumers been so conditioned to shop on the post Thanksgiving weekend that they will be shopping less than they used to over the remaining weeks before the holiday.  This is what happened last year and is consistent with a consumer still nervous about the economic future.  Time will tell.

Entry filed under: Compliance, Economy, General, Regulatory. Tags: , , , , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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