Harper: Learn from the Past; Focus on the Future

NCUA Board Member Discusses Risk, Innovation, Inclusion, and Consumer Financial Protection

WASHINGTON, D.C. (Sept. 10, 2019) – Learning from the past but focusing on the future is essential to meeting a period of significant change with warning signs dotting the landscape, National Credit Union Administration Board Member Todd M. Harper said today.

Speaking to a Women in Housing and Finance Policy event today, Harper said America’s credit unions, the NCUA, and the financial system at large face a variety of risks as the financial and social environment undergoes rapid change. The text of his remarks is available online here.

“We need to be fair and forward-looking; innovative, inclusive, and independent; risk-focused and ready to act; and appropriately engaged with all stakeholders,” Harper said. “We need to have foresight for the year 2020, not just 20/20 hindsight. While it’s important to develop new rules and revise old ones based on lessons learned in the last crisis, it’s equally important to look ahead at risks coming over the horizon.”

Harper detailed his regulatory approach and areas of concern he sees ahead.

Safety, Soundness, Consumer Protection

“One of my priorities is to safeguard the safety and soundness of federally insured credit unions,” Harper said. “I am keenly focused on issues of capital and liquidity and on cybersecurity.

“The NCUA also has consumer financial protection responsibilities for credit unions with assets of less than $10 billion,” he said. “The credit union system has a mission to promote thrift and serve people of modest means. Consistent with the law, we need to work to increase uniformity in our consumer financial protection supervision.”

Emerging Risks

Harper listed several areas where change will be accompanied by risk, and he discussed his recommendations for meeting those changes and risks.

  • Liquidity—Liquidity is essential to surviving times of economic stress, and the NCUA requires credit unions have appropriate risk-management and access to liquidity in place.
  • Rising consumer debt—Consumer debt has reached a record $4 trillion, and credit unions need to carefully evaluate risks when making new loans and hedge risks appropriately.
  • Deficits and national debt—A large and growing national debt creates significant uncertainty.

Working together

The NCUA and all credit union system stakeholders have roles to play and responsibilities to protecting credit union members and the system overall, Harper said.

“By getting ahead of emerging risks and better protecting consumers, the NCUA will have 2020 foresight and not 20/20 hindsight,” he said. “I invite anyone interested in consumer financial protection to reach out to me and share their concerns and solutions. In doing so, we can build a stronger credit union system to better serve everyone in the future.”

NCUA’s Hood: “Working Together is Success”

Agency Chairman Speaks to NAFCU Congressional Conference

WASHINGTON, D.C. (Sept. 10, 2019) – The success of the credit union system rests on credit unions and the National Credit Union Administration working together, NCUA Chairman Rodney E. Hood said today.

“The industrialist Henry Ford once observed that, ‘coming together is a beginning; keeping together is progress; and working together is success,’” Hood said. “Our challenge now should be to determine the best ways to keep the industry’s record of success going, so as to set us on the right course for the future.”

Chairman Hood spoke to National Association of Federally-Insured Credit Unions’ annual Congressional Caucus. The full text of his remarks is available online.

Chairman Hood gave a summary of his first five months at NCUA’s helm and mapped out a cooperative vision for the agency’s and the industry’s futures.

“I’d like to approach this from the perspective of what we’re doing, what you need to be doing, and what we should be doing together,” he said.

What NCUA is Doing

Chairman Hood described his goal of creating “a streamlined and modernized regulatory and supervisory system that encourages innovation, provides flexibility, and fulfills our primary mission of protecting safety and soundness.” To those ends he said, the NCUA has:

  • Increased the commercial property appraisal threshold from $250,000 to $1 million;
  • Proposed an increase to the limit on non-member deposits;
  • Issued interim guidance for credit unions wishing to serve the hemp industry; and
  • Proposed a two-year delay for implementing the risk-based capital rule to explore possible improvements.

The agency also is modernizing its examination system and Call Report.

Chairman Hood added that he plans to bring two proposed rules to the Board before the end of 2019. The first would allow subordinated debt to be counted as regulatory capital for a broader range of credit unions; the second would increase transparency in transactions where credit unions acquire assets of banks.

What Credit Unions Need to Do

Chairman Hood challenged credit unions to take advantage of the many opportunities that rapid technological changes are bringing to the financial sector while being mindful of security.

“We know these trends are going to change the way you engage with your members, the way you analyze lending risk, and the way you market and deliver your products and services,” he said. “We should not approach these challenges as things to be feared or avoided, but as opportunities to serve your members, your employees, and your communities.”

Other areas where credit unions should pay particular attention, he said, include:

  • Liquidity levels;
  • Interest rates, the yield curve, and risks associated with lending and investment;
  • Concentration risk; and
  • Compliance with the Bank Secrecy Act and anti-money-laundering laws.

What NCUA and Credit Unions Can Do Together

Expanding access to financial services, Hood said, should be a top priority for the credit union system, and he noted the recent federal court decision in the agency’s field-of-membership litigation with the American Bankers Association will help credit unions reach more people, particularly in rural and underserved areas.

“We know that, in many parts of our nation, it has gotten harder for people to get the financial services they need,” he said. “We need fresh thinking on how to address the needs of those communities.”

That kind of cooperative effort, Hood concluded, is the basis of the credit union idea.

“This industry’s future success lies with staying true to the values the credit union system was founded upon,” Hood said, “the commitment to people helping people by fostering greater financial inclusion, accessibility, and opportunity for all Americans.”

NCUA Chairman Hood Appoints Michael Sinacore as Deputy Director for External Affairs and Communications

ALEXANDRIA, Va. (Sept. 11, 2019) – National Credit Union Administration Chairman Rodney E. Hood today announced he has appointed Michael J. Sinacore to serve as Deputy Director for External Affairs and Communications.

Michael SinacoreSinacore joins the NCUA from the Office of Sen. Deb Fischer (R-Neb.), where he served as a legislative assistant, focusing on economic policy. He will report to Lenwood Brooks, Chairman Hood’s Acting Chief of Staff.

“Michael has a well-earned reputation for his fine work in the public and private sectors,” Chairman Hood said. “His deep knowledge of public policy, the legislative process, and the inner workings of government will be invaluable assets to the NCUA.”

Sinacore previously worked in the House of Representatives for members of the Financial Services Committee, including Representatives Dave Trott (R-Mich.) and Bruce Poliquin (R-Maine). In these roles, he advised members on various economic issues, including financial services and taxation.

Prior to his service on Capitol Hill, Sinacore worked as a credit analyst in JPMorgan’s London office. While there, he helped implement portions of the Dodd-Frank Act and analyzed underperforming real estate assets acquired as part of the bank’s purchase of Bear Stearns.

“I look forward to serving the NCUA as we seek to ensure the NCUA remains accountable to all stakeholders,” Sinacore said. “I am honored that the Chairman has selected me to support his agenda.”

Sinacore holds a bachelor’s degree in political science and Middle Eastern studies from Boston College and an M.B.A. from the Wharton School at the University of Pennsylvania, where he was his class’s graduation speaker.

Sinacore will assume his duties September 16.

NCUA: Q2 2019 State Credit Union Data Report Now Available

ALEXANDRIA, Va. (Sept. 11, 2019) – Federally insured credit unions generally saw continued positive trends in the second quarter of 2019, according to the latest NCUA Quarterly U.S. Map Review.

The review tracks performance indicators for federally insured credit unions in all 50 states and the District of Columbia and includes information on two important state-level economic indicators: the unemployment rate and home prices.

Nationally credit union membership growth continued, with the strongest growth concentrated in larger credit unions. At the median, membership was roughly unchanged. Eighty-eight percent of federally insured credit unions reported positive net income at the end of the second quarter. Median annual loan growth in the year ending in the second quarter was 4.6 percent, and median annual asset growth was 1.7 percent.

NCUA Awards $1.9 Million in Grants to 155 Low-Income Credit Unions

ALEXANDRIA, Va. (Sept. 13, 2019) – The National Credit Union Administration has awarded $1.9 million in grants to help 155 low-income credit unions increase outreach to underserved communities, improve digital services and security, and train employees.

The NCUA awarded grants ranging from $1,900 to $100,000 to credit unions in 40 states and the District of Columbia. Thirty-one credit unions are first-time grant recipients. Fifty-eight are minority depository institutions.

The NCUA made awards in four categories:

  • Underserved outreach: 11 grants totaling $972,742;
  • Digital services and security: 73 grants totaling $550,612;
  • Training: 46 grants totaling $217,369; and
  • Counselor certification: 35 grants totaling $161,925.

The NCUA’s Office of Credit Union Resources and Expansion administers grant funding provided by the Community Development Revolving Loan Fund, which offers grants and loans to credit unions serving low-income communities. Since 2001, Congress has provided the NCUA with $22.8 million for these grants.

The Office of Credit Union Resources and Expansion supports low-income-designated credit unions; credit unions interested in a low-income designation; minority credit unions; credit unions seeking changes in their charters, bylaws, or fields of membership; and groups organizing to start new credit unions.

Final Opportunity to Qualify for Streamlined CDFI Application in 2019 Ends Oct. 5

Credit Unions Should be Aware of Changes to CDFI Certification Rules

ALEXANDRIA, Va. (Sept. 16, 2019) – Federally insured, low-income credit unions that want to become certified Community Development Financial Institutions have until Oct. 5 to apply to use the National Credit Union Administration’s qualification process for streamlined CDFI certification.

This will be the final opportunity to take advantage of the streamlined certification process in 2019.

Credit unions need to be aware the U.S. Treasury Department has announced important changes to the Community Development Financial Institution and the Native American CDFI Assistance programs. Beginning with the FY2020 application round, credit unions must be certified as CDFIs no later than the date the Notice of Funds is published in the Federal Register. That notice is expected to be published in early 2020.

The agency’s Office of Credit Union Resources and Expansion hosts a resource page with details about CDFI certification and the streamlined process. The agency’s application guide has the necessary instructions for the qualification process. The Community Development Financial Institutions Fund’s webpage offers information about the benefits of CDFI certification.

Developed by the NCUA and the CDFI Fund, the streamlined application process has helped 50 credit unions obtain certification as community development financial institutions.

NCUA Advisory for Sept. 19 Board Meeting

ALEXANDRIA, Va. (Sept. 18, 2019) – The National Credit Union Administration is expecting an unusually large audience for its September 19 open Board meeting, and the agency is making special preparations.

People planning to attend the meeting, which begins at 10 a.m., should be aware of the following:

  • There will be 50 seats available in the agency’s Filene Boardroom;
  • Attendees will be admitted on a first-come, first-served basis;
  • The agency has made an overflow room available for attendees, and those arriving after the boardroom is full will be escorted there;
  • The agency’s headquarters will open at 8 a.m., and attendees will proceed through security as usual and obtain visitors’ badges;
  • Visitors who leave the building after obtaining a badge will need to go back through the screening process when they return, and they will not be given preference for a boardroom seat; and
  • Security staff will begin escorting attendees upstairs at approximately 9:30.

The open Board meeting will be available on a livestream from the agency’s website, NCUA.gov. The meeting agenda is available, and Board documents will be posted on the agenda page when the meeting begins.

Payday Alternative Loan Rule Will Create More Alternatives for Borrowers

Board Action Bulletin

ALEXANDRIA, Va. (Sept. 19, 2019) – The National Credit Union Administration Board held its eighth open meeting of 2019 at the agency’s headquarters today and approved three items:

  • A final rule allowing federal credit unions to offer an additional payday alternative loan option to members.
  • A final rule to clarify the agency’s regulation covering required credit union supervisory committee audits and providing credit unions with additional flexibility in the audit process.
  • A final rule updating, clarifying, and simplifying federal credit union bylaws.

The Chief Financial Officer briefed the Board on the performance of the National Credit Union Share Insurance Fund.

Final Payday Alternative Loans Rule Provides Greater Flexibility

Federal credit unions will be able to offer more payday alternative loan options under a final rule approved, 2-1, by the NCUA Board.

“The PALs II rule is a free-market solution that responds to the need for small-dollar lending in the marketplace,” NCUA Chairman Rodney E. Hood said. “This can make a difference by helping borrowers build or repair credit records, allowing them to graduate to other mainstream financial products. We want to encourage responsible lending that allows consumers to address immediate needs while working towards fuller financial inclusion. Particularly when coupled with financial counseling, as many credit unions provide, such lending can be a powerful tool to help people get out of debt and climb the ladder toward financial security. This is an example of the fundamental credit union principle of people helping people.”

The final rule, known as PALs II, does not replace the existing payday alternatives loan option. The final rule approved today:

  • Allows a federal credit union to offer a PALs II loan for any amount up to $2,000;
  • Requires PALs II loans to have a minimum term of one month with a maximum of 12 months;
  • Allows a federal credit union to make a PALs II loan immediately upon the borrower’s establishing membership; and
  • Restricts a federal credit union to offering only one type of PALs loan to a member at any given time.

All other requirements of the existing payday alternative loan program—a prohibition against rollovers, a limitation on the number of loans a single borrower can take in a given period, and full amortization—remain in effect.

The final rule will become effective 60 days after publication in the Federal Register.

Final Rule Simplifies, Clarifies Supervisory Committee Audits

The NCUA Board unanimously approved a final rule amending the supervisory committee audit regulation for federally insured credit unions.

The final rule updates outdated provisions of the regulation and provides added flexibility to federally insured credit unions with assets less than $500 million while continuing to ensure appropriate financial oversight.

The final rule:

  • Replaces the outdated Supervisory Committee Guide Audit alternative to a financial statement audit and replaces it with a simplified appendix to the regulation;
  • Eliminates two types of audits federally insured credit unions seldom use; and
  • Eliminates the 120-day deadline for receiving a third-party audit report and gives credit unions the ability to negotiate a delivery date.

The final rule implements recommendations contained in the agency’s Regulatory Reform Task Force’s reform agenda.

The final rule will become effective 90 days after publication in the Federal Register.

Final Bylaws Rule Adopted

The Board unanimously approved a final rule that updates its regulation on federal credit union bylaws.

The final rule codifies in one place several existing NCUA legal opinions and clarifies several bylaw provisions. For example, it provides detailed guidance to help credit union officials, employees, and members better understand bylaw provisions, including a credit union’s ability to limit services to a disruptive or abusive member. The final rule also clarifies that the process to expel a member is statutory.

The final rule will become effective 90 days after publication in the Federal Register.

Strong Operating Trends Mark Share Insurance Fund Q2 Performance

The National Credit Union Share Insurance Fund reported a net income of $79.1 million and a net position of $16 billion for the second quarter of 2019.

Strong investment income earnings drove the net income. Second-quarter total income was $81.2 million. The equity ratio was 1.33 percent, calculated on an insured share base of $1.2 trillion. Operating expenses were $49.8 million in the second quarter, and the provision for insurance losses decreased by $47.7 million.

For the second quarter of 2019:

  • The number of CAMEL codes 4 and 5 credit unions increased 1.0 percent from the end of the first quarter, to 204 from 202. Assets for these credit unions decreased 6.8 percent from the first quarter, to $11 billion from $11.8 billion.
  • The number of CAMEL code 3 credit unions decreased to 3.6 percent from the end of the first quarter, to 872 from 905. Assets for these credit unions decreased 0.2 percent from the first quarter, to $50.4 billion from $50.5 billion.

There were no federally insured credit union failures in the second quarter of 2019 that caused a loss to the Share Insurance Fund. Total year-to-date losses associated with credit union failures is $40 million.

The second-quarter figures are preliminary and unaudited.

The NCUA tweets all open Board meetings live. Follow @TheNCUA on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. The NCUA also live streams, archives and posts videos of open Board meetings online.

NCUA Chairman Hood Appoints Lenwood Brooks Chief of Staff

ALEXANDRIA, Va. (Sept. 25, 2019) – National Credit Union Administration Chairman Rodney E. Hood has appointed H. Lenwood Brooks, V, to serve as his Chief of Staff.

Lenwood BrooksBrooks, who joined the NCUA on May 28, has been serving as Acting Chief of Staff and Director of the Office of External Affairs and Communications.

“Since joining the team, Lenwood has played an integral role in agency policy and communications,” Hood said. “He also has been important to furthering my initiatives for the NCUA and the nation’s system of cooperative credit.”

Brooks came to the NCUA from the Securities Industry and Financial Markets Association, where he served as Vice President of Communications and led the trade association’s external affairs activities.

Previously, Brooks served on Capitol Hill as an advisor to Sen. Roger F. Wicker (R-Miss.), providing counsel during the Senator’s service on the Senate Banking Committee.

“I look forward to supporting Chairman Hood in advancing his initiatives to create a regulatory environment that grows the economy,” Brooks said.

Brooks holds an undergraduate degree from the University of Mississippi in managerial finance and insurance and risk management. He holds a master’s degree in economic and workforce development from the University of Southern Mississippi. Brooks also holds a certificate from the Securities Industry Institute, an executive education program at The Wharton School.

Brooks assumed his duties on September 24.

NCUA, SBA Hosting Webinar on Loan Programs

ALEXANDRIA, Va. (Sept. 25, 2019) – Credit unions interested in learning more about Small Business Administration loan programs can get valuable information from an October 16 webinar hosted by the National Credit Union Administration and the SBA.

Registration for the webinar, “The Big Picture of SBA Lending for Credit Unions—Part 1,” is now open. The webinar is scheduled to begin at 2 p.m. Eastern and run approximately one hour. Participants will be able to log into the webinar and view it on their computers or mobile devices using the registration link. They should allow pop-ups from this website.

This will be the first of two webinars hosted by the agencies.

William Briggs, Senior Advisor in the SBA’s Office of Capital Access, and Dianna L. Seaborn, Director, SBA Office of Financial Assistance, will discuss:

  • A brief history of the SBA;
  • SBA benefits to the borrower and to the credit union;
  • An overview of SBA programs; and
  • How offering small business loans may align with your credit union’s mission.

The NCUA will provide live Twitter updates on @TheNCUA. Participants can submit questions over Twitter anytime during the presentation and in advance by emailing [email protected]. The email’s subject line should read, “SBA Lending for Credit Unions – Part 1.” Please email technical questions about accessing the webinar to [email protected]. This webinar will be closed captioned and archived online approximately three weeks following the live event.

In April, the NCUA and the U.S. Small Business Administration announced a three-year collaborative effort to bring small businesses and credit unions together and expand awareness about SBA programs.

NCUA’s Office of Credit Union Resources and Expansion supports low-income-designated credit unions and credit unions interested in a low-income designation; minority credit unions; credit unions seeking changes in their charters, bylaws, or fields of membership; and groups organizing to start new credit unions.