Posts tagged ‘Brad Smith’

The Most Informative Blog of the Year

So much for a quiet end to the year. With Congress still rushing to get a COVID relief bill done, NCUA rushing to get some important regulations done, the Russians looking to get some important hacking done and the CDC trying to execute the vaccine roll-out, the past few days have been among the most impactful for the credit union industry this year. Here are the highlights of what you need to know before breaking for your holiday vacation.

NCUA Finalizes Subordinated Debt Regulation

NCUA finalized regulations which will allow complex credit unions to utilize subordinated debt to help meet their risk-based capital requirements when they kick in in 2022. Additionally, for the first time, eligible credit unions can offer subordinated debt to natural persons. Those are just two of the highlights from an extremely important regulation, which creates an updated framework for credit unions that wish to use what used to be called secondary capital. 

One of the big debates going on within the industry has been the extent to which credit unions should be allowed to use secondary capital. On the one hand, former NCUA Board Chairwoman Debbie Matz encouraged eligible credit unions to get their low-income designations in part so that they could utilize secondary capital. In recent years, the pendulum has swung back the other way, with NCUA issuing strict guidance for the approval of secondary capital plans. Individuals who feel that NCUA is too tough on this issue will find little comfort in the final regulations. NCUA now considers subordinated debt to be a security, meaning that credit unions will have to comply with detailed and complicated legal disclosures and oversight provisions. I’ll have more on this in the future, but it’s not too early to start thinking about who in your credit union is going to be designated the in-house security law expert. 

In a typical board meeting, the finalized subordinated debt rule would be more than enough work, but NCUA also took the opportunity to propose several new and important regulations. These include permitting multiple SEG credit unions that participate in shared branching networks to utilize shared branches to satisfy branch location requirements when expanding into new areas. The key is that credit unions will no longer have to own a portion of a shared branching network in order to take advantage of this increased flexibility. The board also extended temporary regulations promulgated in response to COVID-19, which provide regulatory relief to credit unions. Over the strong objections of Board Member Harper, the Board proposed a rule that would give credit unions greater flexibility when it comes to overdraft protections. Specifically, credit unions can now give consumers more than 45 days to either cure the overdraft or enter into a traditional loan. In objecting to the proposal, Board Member Harper argued that the proposal will hurt consumers who he feels need more protection against overdraft programs, not less. 

The NCUA still wasn’t done. It has proposed regulations permitting federal credit unions to purchase servicing rights from other federally insured credit unions. This is an aggressive move by NCUA, which has in the past been hesitant to propose such a change on safety and soundness grounds. 

Show MeThe Money

The NCUA also got some important budget issues out of the way. First and foremost, the normal operating level of the share insurance fund will remain at 1.38% for the time being, and with new Board Member Kyle Hauptman now officially onboard, the NCUA approved next year’s budget. As part of the process, the NCUA made regulatory changes to the overhead transfer rate (OTR)  and the operating fee schedule. The OTR is the formula used to determine how much money NCUA needs to fund its share insurance examination expenses. In recent years it has come under scrutiny since it allows NCUA to assess not only federal credit unions, but state chartered ones as well. The budget was passed over the objection of Board Member Harper, who continues to advocate for greater scrutiny of credit union compliance with consumer protection laws.

EEOC Issues Vaccine Guidance

Many credit unions are considering whether or not they should mandate that their employees get the COVID-19 vaccine. On Wednesday, the EEOC issued this important updated guidance explaining the legal issues that employers should consider if they decide to mandate that their workforce get vaccinated.

From Russia With Love

In a plotline worthy of a John le Carre novel, the size, scope and damage of the recent mass cyberattack, widely believed to be the work of Russia’s intelligence services, continues to grow. It’s hard to believe it won’t end up impacting a large swath of the private sector, and it is certainly something that your IT team should be paying attention to. Here is a blog on the issue published by Microsoft’s President Brad Smith, who has emerged as an authoritative voice on the breach in the absence of a coordinated federal response. 

Believe it or not, there’s much more I could say, but tomorrow is another day. Stay tuned.

December 21, 2020 at 10:01 am Leave a comment


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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