News Flash: Treasury Report is Worth Reading

June 14, 2017 at 9:11 am Leave a comment

No administration is truly complete without at least one Treasury Department Report calling for radical reforms to the banking system. They are like a Sean Spicer press conference: they generate lots of headlines and are sometimes entertaining, but they are almost always meaningless exercises.

The report released by the Trump Administration on Monday however proposes a series of changes for credit unions that are worth paying attention to. First, many of the proposals can be implemented without legislative action; Secondly, with the Trump administration being able to pick a new director of the CFPB next July, these proposed changes could be viewed as a blueprint for the type of reforms we could see under a Trump chosen director. Here is a best- of- list in which I am highlighting the reforms that would both impact credit unions positively and are actually achievable.

  • The report calls on NCUA to apply its risk based capital requirements only to credit unions with $10 billion or more in assets. Instead credit unions of all sizes should have a single leverage test.
  • Currently RBC requirements are scheduled to be imposed on credit unions with $100 million more in assets, starting in 2019.
  • The proposal calls for the CFPB to raise the threshold for compliance with Dodd-Frank’s ability to repay/qualified mortgage requirements from institutions with $2 billion in assets to those with assets somewhere between $5 and $10 billion. This is an example of the type of change we could see with a new director.
  • Treasury calls for the coordination of cybersecurity requirements.
  • Amen to that. Do we really want 50 different state and competing federal cybersecurity requirements?
  • The report endorses the expanded use of supplemental capital by credit unions. This clearly will provide further support to NCUA as it considers what authority it can give credit unions to use supplemental and secondary capital.
  • If I had to list one warning sign in the report, it is Treasury’s call to consider streamlining and coordinating regulatory activities. While this sounds harmless in theory, in practice it could open the door to elimination of the NCUA.
  • The report recommends raising the threshold for mandated credit union stress testing from institutions with $10 billion to $50 billion in assets.

On that note enjoy your day!


Entry filed under: 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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