Posts tagged ‘Rodney Hood’

Having “the Talk” … with your IT Team

When Rodney Hood started talking about the importance of cybersecurity for credit unions shortly after becoming Chairman, to me, he sounded like the guy who comes about an hour late to the party. After all, cybersecurity has been a key priority of financial regulators for years now. But the COVID-19 pandemic has proven me wrong. With the number of credit union employees now working remotely, consumers relying more heavily than ever before on electronic transactions, and hackers being so brazen that they now steal from Robinhood (I couldn’t resist), your credit union is dealing with new cyber challenges coming from directions it could never have anticipated. 

This puts the credit union senior management, and ultimately their boards of directors, in the hot seat given they’re the entities ultimately responsible for making sure your IT team is implementing the proper policies and procedures to both protect members and keep the place going. But in order to do this, boards have to know the right questions to ask. At yesterday’s board meeting, Johnny E. Davis, Special Advisor to the Chairman on Cybersecurity, provided an easy-to-understand list of questions in his presentation that a board member could use to zero in on how it’s IT staff has responded to the pandemic. For example, has anyone asked your credit union what policies and procedures it has put in place related to remote access by employees? Another basic but crucial question to consider is how your credit union is preparing in the mid to long-term for the changes that have been accelerated by COVID. For example, in it’s quarterly earnings discussion with financial analysts earlier this week, JP Morgan commented on how it has seen an increased use of online banking resources by consumers, and how it believes that much of the shift is permanent. As a colleague of mine recently said, credit unions better have the technology locked and loaded, because even grandparents are getting used to remote deposit. 

All of this of course introduces a compliance component to consider. Cybersecurity is a point of emphasis for your examiner, and irrespective of your size and sophistication, you should be able to document in your board minutes the steps you are taking with regard to your IT infrastructure. 

NCUA Takes the Wheels Off when it Comes to Derivatives

In yesterday’s board meeting, the NCUA also proposed updates to regulations which would give sophisticated credit unions (with 500 million or more in assets) greater flexibility to use derivatives to hedge against interest rate risk. Under the proposal, these credit unions would no longer require prior approval from NCUA to use derivatives, nor would they be restrained to a specific list of permissible investments. At the same time, board members continue to stress that examiners will evaluate derivative activity to ensure that they are being properly used, and that the credit union and its board have the proper expertise and knowledge required to administer such a program. 

On that note, enjoy your weekend, I’ll be back on Monday.

October 16, 2020 at 9:46 am Leave a comment

Push to Exempt CUs from CECL Continues

NCUA continued its push to get credit unions exempt from the updates to the Current Expected Credit Loss (CECL) methodology, with which credit unions are currently mandated to comply with no later than December 15, 2022. 

The latest call for an exemption came in the form of this op-ed from Chairman Rodney Hood, who underscored that COVID-19 further complicates compliance issues. “At a time when credit unions should be focusing their attention on serving their members, the absolute last thing they need is to be burdened by a costly methodology that could have a chilling effect on lending, especially in underserved and rural communities that are the most vulnerable to the pandemic and its effects.”

CECL also made news this week because bank regulators finalized rules allowing banks to phase in CECL accounting standards incrementally over a three-year period as a means of minimizing a sudden hit to loan losses caused by the shift to CECL. Remember that NCUA already finalized this process for credit unions back in the summer. 

I will save my usual rant about how important it is to be preparing for CECL compliance, even as you continue to hope that it will be scrapped before the compliance deadline. On that note, enjoy your day.

October 5, 2020 at 9:35 am Leave a comment

Hood Clarifies NCUA Position on Bank “Mergers”

In a recent column in the American Banker, (subscription required) NCUA chairman Rodney Hood clarified some important issues related to the small but increasing number of bank/credit union combinations. Typically I try not to pay too much attention to banker hyperbole since there really are more important things for credit unions to worry about than the fact that banker associations don’t like them. But given the extent to which misinformation is increasingly confusing issues surrounding credit union acquisition of bank assets, I was glad to see the Chairman address some important misconceptions.

First and foremost, credit unions can’t merge banks into them. Instead they can enter into purchase and assumption agreements in which they agree to purchase some or all of a bank’s assets. As the Chairman explains “when speaking of credit unions “acquiring” banks, these credit unions are actually purchasing bank assets and certain liabilities in market based transactions. These purchasers could include loans and deposits” but cannot include stock.

This is more than a legalistic distinction. It means for example, that when assessing whether or not to go forward with an acquisition, credit unions have to take into account the compatibility of the financial institution’s customer base with its existing field of membership. In fact, describing these transactions as mergers is like describing an estate sale as a real estate transaction. When a bank, or any other corporation for that matter, completes a merger, it is generally stepping in the shoes of the previous company and taking on all its obligations. In contrast, when conducting a purchase and assumption (P&A), the purchaser is only taking legal responsibility for the assets it purchases.

Then there is the policy issue. Specifically, is there something inappropriate about credit unions purchasing bank assets? Unlike an increasing number of my fellow Americans, I actually believe that the free market works pretty well. Why shouldn’t community banks have the choice of maximizing their assets by entertaining acquisitions by credit unions as well as banks? If I were running a community bank I would welcome any potential purchaser who is going to treat my customers well and give me the best value for my business.

One more thing, the banking associations would be doing a lot more for their average community bank member if they went to congress and advocated for changes in the law which gave them the ability to compete once again against larger banks. Of course this won’t happen. Besides, it is so much easier to obsess about a relative handful of credit union P&As than it is to acknowledge that larger banks are gobbling up smaller banks out of existence.

NCUA to meet with Task Force

The Credit Union Times is reporting this morning that NCUA has agreed to meet with the New York City Taxi Medallion Task Force which released its recommendations for the industry this past Friday. This can only be good news as any resolution of this issue is going to involve NCUA.









February 5, 2020 at 9:34 am Leave a comment

Three Quick Hits For A Thursday Morning

Don’t look now but common sense might be breaking out in at least one small corner of the nation’s capital. Yesterday, the House Financial Sub Committee on Consumer Protection and Financial Institutions held a hearing laying out why it makes sense for marijuana related businesses to be legalized as a matter of federal law if the goal is to provide safe, affordable banking services to these legal businesses.

Speaking on behalf of CUNA was Rachel Pross, the Chief Risk Officer of Maps Credit Union based in Oregon. Maps is a particularly noteworthy institution when it comes to the issue of financial services for marijuana related businesses because it has been providing these services since 2014 making it one of the most experienced financial institutions in this space. She explained that her Board of Directors ultimately decided to provide banking services despite the legal uncertainty because it concluded that doing so was consistent with the credit union’s mission to serve the underserved and to enhance the safety of the local community.

The Independent Community Bankers offered the testimony of a $145 million asset state chartered community bank based in Spokane, Washington which has so far declined to offer banking services to marijuana related businesses. Its board of directors has concluded that the “legal stakes are simply too high” for the board to tolerate. He explained that a wrong decision on marijuana banking services could put the survival of his bank at risk.

The solution to this uncertainty is “the Secure and Fair Enforcement Banking Act of 2019.” The bill would legalize the provision of banking services as a matter of federal law in those states that choose to legalize marijuana.

I continue to be optimistic that this is one of the few issues you may see resolved by Congress over the next two years. Whether you are in favor or opposed to marijuana legalization, having an industry dependent on unprotected cash transactions risks for the public as a whole; if you are a republican who believes in state’s rights then this legislation makes sense because you are letting states effectively regulate the choices that their legislatures make and if you are from the progressive wing of the party, this compromise will act as a catalyst for making sure that marijuana businesses will have access to the money they need to grow.

NCUA Board Nomination Hearings Today

Later today the Senate Banking Committee will be holding hearings on the nominations of Todd Harper and Rodney Hood to join the NCUA board.

Where’s the beef? Here’s the beef.

Wendy’s has reached a $3.4 million settlement with consumers impacted by the 2016 data breach of the chain. Specifically the settlement authorizes consumers to receive up to $5,000 to individuals who attended one of the impacted Wendy’s between October 25, 2015 and June 28, 2016.

February 14, 2019 at 9:00 am Leave a comment

Ocasio-Cortez Named to House Financial Services Committee

High-profile freshman Congresswoman Alexandria Ocasio-Cortez, who has already become one of the best known  politicians in the country following her upset victory over Joe Crowley, was named to the all-important House Financial Services Committee where she will serve in the new Democratic Majority. The appointment means that Cortez is well positioned to continue advocating for some fundamental policy changes. For example, she recently proposed raising the highest tax bracket for  federal income tax purposes to 70%.

NCUA’s Website Worth A Look

Now that I’ve been kicking the tires for a couple of weeks, I am here to announce that the  NCUA deserves high praise for its revamped website.  I’m not joking. Not only is it much easier to figure out where information is located but it is actually designed in a way that recognizes that there are a bunch of us for whom the website is an important work tool. For example, I can now once again easily retrieve legal opinion letters – such as those I cited on removal of credit union members the other day – and the website breaks down these searches by category. Whoever redesigned the site deserves a raise.

ADA Websites Exploding

Sometimes I think that credit unions are under the impression that they are being singled out for ADA website litigation. But that is simply not the case. This morning’s New York Law Journal is highlighting research indicating that New York’s federal courts saw 1,471 cases filed in 2018 claiming ADA website violations. This accounted for 64% of the 2, 285 ADA website accessibility lawsuits started in seven major states including California, Massachusetts, Florida, Pennsylvania, Texas and Georgia tracked by the company USAbleNet. Governor Cuomo likes to say that New York leads the nation and for whatever reason it is doing a good job in leading the nation when it comes to ADA lawsuits. The report estimates that New York is home to 25% of the  companies that have been sued  over  websites.

Whatever you think about these lawsuits, it really is in everyone’s best interest to have the Justice Department finalize regulations explaining if the ADA applies to websites and if so, what steps have to be taken to comply with this mandate.

NCUA Meeting A Real Yawner

Yesterday’s meeting of the NCUA’s board, was less than inspiring. Its highlight was the approval of its 2019 Performance Plan which is dedicated to, among other things, making sure it  “Fully and efficiently execute the requirements of the agency’s examination and supervision program.” Whenever I read Government spinning out performance plans, it always gives me the creeps. It smacks of Chairman Mow spinning out a five-year plan for government improvement.

Speaking of NCUA, Rodney Hood who previously served on the NCUA Board has been re-nominated to once again serve on the board because the Senate did not act on his nomination prior to the close of last year. I wonder what the record is for the most times a person has been nominated to the NCUA Board.


January 18, 2019 at 9:16 am Leave a comment

Get Ready To Publicly Defend Your Community FOM

Happy Summer People. Yours truly is back after spending some time in God’s country (a/k/a Long Island) and going to the Harry Styles concert with my 15-year-old daughter. I have to admit I liked it.

I also took some time to read though the results of last Thursday’s NCUA board meeting. And I think the material is important and/or dense enough to be broken up into two blogs. Today I will be doing an overview of some field of membership changes the board approved and tomorrow I will be talking about additional requirements imposed on merging credit unions. State credit unions will be particularly interested. How’s that for a cliff hanger?

Under the new FOM regulations, there are limited circumstances under which credit unions can use a narrative approach to explain why an area should be considered part of a well-defined local community even though it falls outside pre-recognized government boundaries in a very helpful move the NCUA has outlined 13 criteria which credit unions should use in developing the narrative. Now remember, don’t think that your credit union has to satisfy each criterion in order to get approved for a community charter expansion but the more you can address the areas of concern to NCUA, the better off you will be.

The biggest change NCUA has approved is a requirement to mandate public hearings any time a credit union is using a narrative approach to expand beyond 2.5 million people. Under this approach, interested parties will be authorized to provide written comments on the proposed expansion and there will be a public hearing limited to no more than seven people. For those of you interested in finding out more about this new requirement, you can find it in the amendments to § V.A.2 of the Chartering Manual in the Final Rule.

This is just one man’s opinion. But because one of the most common areas of attack by the bankers is that NCUA abuses its discretion in approving community charter expansions creating a mechanism for a detailed public record and hearing process actually makes sense.

Who Said You Can’t Go Home Again Or Meet The New Boss, Same As The Old Boss

Is it just me or does anyone find it the slightest bit troubling that the NCUA Board is of so little interest to so many people that individuals are re-nominated for second acts?

Whether you are a fan of Pete Townsend or Thomas Wolfe, NCUA continues to show that it welcomes people back with open arms. Last week, as I’m sure many of you already know, the Trump Administration nominated Rodney Hood to serve as the Democrat on the pre-member board which currently only has two members. If he is approved by the Senate, board member Rich Metsger can finally get on with his life. His term would expire August 2, 2023.

What I am most interested in learning more about is whether Mr. Hood is willing to take a second look at NCUA’s pending risk based capital regulations for credit unions with 100 million or more in assets.

On that note, enjoy your day.

June 25, 2018 at 9:19 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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