McWatters Cites Accomplishments and Promises to Work Cooperatively with CUs

In a speech on February 26 at the Credit Union National Association's Government Affairs Conference, National Credit Union Administration (NCUA) Chairman McWatters highlighted the agencies accomplishments and promised continuing cooperation between NCUA and credit union stakeholders.

Chairman Mcwatters promised the attendees of continued inclusion, accountability, and transparency in the agency's decision-making.

He further reassured the audience that "[w]hile we may agree to disagree on certain issues, please understand your voices are heard."

Chairman McWatters commented that credit unions and community banks could work together in good faith to address common challenges facing Main Street financial institutions.

Accomplishments over the last year include closing the Temporary Corporate Credit Union Stabilization Fund four years early, payment of an equity distribution of $736 million to credit unions, and the avoidance of a premium assessment of $1.3 million. He also pointed out the restructuring efforts at the agency.

However, the speech did not break any new ground on forthcoming regulatory initiatives at NCUA.

Read the speech.

McWatters Outlines His 15-Point Plan for Loosening CU Regulation

National Credit Union Administration (NCUA) Acting Chairman J. Mark McWatters discussed his 15-point plan of loosening credit union regulation at the Credit Union National Association's Governmental Affairs Conference in Washington, D.C.

Acting Chairman McWatters stated that the goal is "to reduce the regulatory and supervisory burden on the credit union community without threatening the safety and soundness of the National Credit Union Share Insurance Fund."

Addressing credit union fears about a possible premium assessment this year, McWatters stated that it is his top priority in 2017 to merge the Temporary Corporate Credit Union Stabilization Fund (Stabilization Fund) into the National Credit Union Share Insurance Fund (NCUSIF). He stated that such a merger would allow NCUA to minimize or avoid a premium assessment this year and would start a multi-year process of rebating surplus funds from the NCUSIF to federally insured credit unions But before the NCUA Board votes to close the Stabilization Fund, the agency needed to thoroughly research and evaluate accounting, legal, and financial issues.

Another elements of his plan would include revisiting the agency's controversial risk-based net worth regulation and other needlessly burdensome rules.

McWatters also stated that the agency would abolish its examination reliance on “best practices,” which lack statutory or regulatory support.

He called on the agency to develop an improved appeals process for examinations and other matters of controversy. In addition, NCUA needs to create a credit union advisory council in order for the agency to hear and learn from credit unions.

The agency should require all merger solicitation documents to provide, without limitation, a discussion of any change-in-control payments and other management compensation awards and agreements, and that such disclosures are written in plain language and delivered to voting members in a reasonable time prior to the scheduled merger vote.

He further stated that NCUA would support updating the Federal Credit Union Act to foster credit union opportunity and growth.

Read McWatters' speech.

Matz: We Reset the Default Switch to Yes

In a speech to the Credit Union National Association's Government Affairs Conference, National Credit Union Administration (NCUA) Chairman Debbie Matz stated that NCUA had to reset the default switch to yes.

Chairman Matz told the credit union audience that to make it easier for credit unions to serve their members, NCUA needed to reset the default switch to "yes."

She noted that "[t]oo often in the past, that default switch was set to "no.""

Chairman Matz said:

You asked us to remove the fixed-assets limit. So, yes, we did. You asked us to remove member-business lending limits not required by law. So, yes, we did. You asked us to expand the definition of a "small credit union." So, yes, we did. Now, three out of every four credit unions can qualify for regulatory relief in any future NCUA rulemaking.

If your credit union meets the criteria for a low-income designation, now all you have to do is say yes. By flipping that regulatory switch to yes, we’ve doubled the number of low-income credit unions over the past four years.

And, incidentally, by earning a low-income designation, nearly half of all federally chartered credit unions are now exempt from the statutory member-business lending cap.

She further stated that NCUA will continue to listen to credit unions and will make changes that will benefit you.

This eagerness to accommodate the requests of credit unions will only re-enforce bankers' views that NCUA is a cheerleader regulator.

Also, Chairman Matz in her remarks identified two crucial issues that will determine the future of credit unions -- making millennials into members and adopting strong cybersecurity.

Read the speech.

CUs Lobby Congress, Avoid Paying DC Hotel Occupancy Tax

The Credit Union National Association's Government Affairs Conference (GAC) kicked off on Sunday. The GAC runs from February 21 thru February 25.

It is estimated that nearly 5,000 individuals will attend the GAC.

Credit union officials from around the country are descending on Washington, D.C. to lobby Congress about preserving the credit union industry's tax exemption, which is estimated to cost almost $27 billion over the next decade, and for greater powers, such as expanded business lending authority.

In addition, officials from federal credit unions attending the GAC are exempt from state and local taxes assessed to room charges, as long as the final payment is made by a federal credit union-issued check, share draft or credit card.

The hotel occupancy tax rate in Washington, D.C. is 14.5 percent. The price for a room per night at official GAC hotels ranges from a low of $265 to a high of $329. This means that each night the District of Columbia could lose between $38.43 and $47.71 in occupancy tax revenue per room.

It is outrageous that officials from federal credit unions can come to Washington to lobby Congress about preserving their tax exemption, while avoiding paying local hotel taxes.

Matz: Count Subordinated Debt as Supplemental Capital for Risk-Based Capital Ratio

In a speech to the Credit Union National Association's Government Affairs Conference, the National Credit Union Administration Chairman Debbie Matz stated that in 2015 the agency will allow complex credit unions to count subordinated debt as supplemental capital for the risk-based capital ratio.

She noted that this will require three changes. "First, we would need to provide consumer protections. Second, we would need to change the order of Share Insurance Fund payout priorities to recognize that supplemental capital accounts are not insured. And third, we would need to set prudent standards for credit unions to offer subordinated debt to supplement their risk-based capital."

Furthermore, she stated that the agency is exploring "ways to increase access to secondary capital for low-income credit unions this year. This could include regulatory relief to make secondary capital more attractive to potential investors in low-income credit unions, whether federally or state-chartered."

I will be interested in seeing NCUA's legal analysis on how credit unions, other than low-income credit unions, have the legal basis to count subordinated debt as supplemental capital.

Read the speech.

NCUA to Allocate Resources to Areas of Greatest Risk

While NCUA Chairman Matz's speech at CUNA's Government Affairs Conference had the usual applause lines about increased business lending authority and the need for supplemental capital for credit unions, her speech also detailed how the agency is revamping itself to meet challenges confronting credit unions.

Chairman Matz stated that the agency is "reallocating resources toward the highest risks." NCUA's exam program is being overhauled so that small and large credit unions will be treated differently. NCUA examiners will spend "more time in large credit unions which pose the greatest risks to the Share Insurance Fund, and less time in well-performing, smaller credit unions."

She also noted that NCUA has a responsibility to protect credit unions from unacceptably risky actions taken by other credit unions. Credit unions will no longer be given "a pass on adhering to policies which protect safety and soundness." If there are deficiencies, examiners are going to write Documents of Resolution and hold credit unions accountable to address these deficiencies.

She also points out that as credit unions become more sophisticated and complex, the agency needs to hire subject matter experts to address these emerging issues.

My take away from her speech is that if you are a small credit union offering plain vanilla products, you should see less regulatory burden. On the other hand, large credit unions and credit unions offering sophisticated products should expect greater scrutiny.

Read Chairman Matz's speech.

Cherry Blossoms, Hotel Occupancy Tax, and CUNA's GAC

The National Cherry Blossom Festival begins on March 20th and hundreds of thousands of visitors will visit Washington, D.C. to see the delicate pink blossoms. Many of these visitors will also pay the D.C. hotel occupancy tax of 14.5 percent along with local sales taxes; but not federal credit union officials attending the Credit Union National Association's Government Affairs Conference (GAC), which runs from March 18 through March 22.

The Federal Credit Union Act exempts employees and officals from Federal Credit Unions from the hotel occupancy tax, as long as the final payment is made by check, share draft or credit card issued by a federal credit union and the tax exemption forms are presented upon hotel check-in.

In addition, federal credit union officials are exempt from the District's Sales and Use Tax on any purchases that they make while attending this conference.

I'm estimating that the District of Columbia could lose approximately $500,000 in tax revenues over that four day period.

This is just wrong.

Why should these federal credit union officials be exempted from paying the hotel tax, when other people visiting our nation's capital pay this tax?

Why Should FCU Officials Be Exempt from Washington D.C. Taxes?

Nearly 5,000 credit union activists are attending CUNA's Government Affairs Conference and the big loser is the city of Washington, D.C.

Why am I saying the District of Columbia is a big loser?

Over the four day event, the city may lose $500,000 or more in tax revenues.

Representatives from Federal credit unions attending this conference are exempt from the city's hotel and occupancy tax, which is currently 14.5 percent. (click to enlarge)


With convention room rates ranging from a low of $246 at the Hampton Inn or Hilton Garden Inn to $326 at the Capitol Hilton, that means each night the city loses between $35.67 and $47.27 in tax revenue per Federal credit union attendee.

Moreover, these officials from federal credit unions are also exempt from the city's sales tax when conducting business with vendors at the conference. (click to enlarge)


It seems very bizarre that federal credit union officals are subsidized by the taxpayers of the District of Columbia to come to Washington to lobby Congress to preserve their preferential tax treatment and to expand their powers, when struggling families visiting our nation's capital are subject to these taxes.

That just doesn't seem to be fair.