Three Questions For The Newest Member Of The Board

May 15, 2013 at 7:57 am Leave a comment

If the CU Times is correct, then my very quiet campaign to be nominated to serve on the NCUA Board has failed.  The Obama Administration is set to nominate Rick Metsger, a former state legislator who the Credit Union Association of Oregon once named its Legislator of the Decade.

The position has two unique roles, as I see it.  One is to be an advocate for the industry as a whole.  This is the fun part of the job where you get to extol the virtues of the cooperative movement, bemoan excessive regulation and pat board members on the back for their thankless service.  A second less exciting but more important part of the job is to establish the framework for the appropriate oversight of the safety and soundness of the industry.  So here are the three questions I would want addressed by the NCUA staff if I ever get my nomination through the vetting process.

1)  What are the systemic risks facing the industry as a whole?  In a recent speech, Federal Reserve Chairman Ben Bernanke talked of a shift in examiner emphasis between monitoring the operational risks of individual banks and recognizing trends that pose a risk to the banking industry as a whole.  For example, the mortgage meltdown triggered the financial crisis but it was the inability of examiners to recognize the interconnectedness of banks to the mortgage industry that turned a cyclical decline in housing prices into a threat to the entire economy.

Does NCUA have an idea of what systemic risks, if any, are unique to the credit union industry?  The NCUA Board throws around the term systemic risk, but it means more than just paying particularly close attention to larger institutions.  It means identifying those vulnerabilities that cause a threat to all credit unions that only regulators are in a position to take action against.  Remember, this is an agency that didn’t have an office of chief economist until 2010, so you to excuse me if I am a little cynical.

2)  Are some credit unions too small to succeed?  Are the days of the small credit union numbered?  Not necessarily, but there are some baseline regulations with which all credit unions and other financial institutions should have to comply and to the extent any institution doesn’t have the resources or expertise to meet these expectations, then how should NCUA respond?  On one track, more mergers seem inevitable.  But NCUA can demonstrate that there is a difference between a credit union that is small for the sake of being small and a small credit union with a well-executed business strategy and growth plan.  What are examiners doing to strike the right balance between the two and is it enough?

3)  How much should NCUA coordinate its activities with state level examiners.  The trend in recent years has been to aggressively obliterate distinctions between state and federal supervision with the result that the utility of the dual chartering system is very much in jeopardy.  This makes absolutely no sense.  It’s a lousy use of resources at a time when every dollar we give to regulators has to be well spent and it makes it more difficult for state chartered credit unions trying to comply with two separate assessments of how best to assure the safety and soundness of their institutions.  I want to know if our newest board member is willing to explain precisely where NCUA feels the line should be drawn when overseeing activities of state chartered institutions.

Americans Continue to Pay Down Debt

The Federal Reserve Bank of New York released its quarterly survey of household debt and Americans continue to pay down their outstanding bills.  Of course, this is a good news, bad news kind of thing.  There can be no robust economic recovery without consumer spending, so the question is at what point do people feel it is time to start getting out the credit card again and going out to dinner?  If this new-found frugality continues, at some point we are going to have to scale down our expectations for long-term economic growth.

See you tomorrow.

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

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Authored By:

Henry Meier, Esq., Senior Vice President, 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. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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