Compliance Blog

Written by Steve Van Beek

During NAFCU's Congressional Caucus, NCUA Chairman Debbie Matz unveiled her Regulatory Modernization Initiative.  The content of her speech can be found here.

Here is a section with details on the framework from the release:

"NCUA is planning to modernize four main rules to strengthen safety and soundness by addressing marketplace practices and emerging risks:  

 - A new loan participation protection rule covering both originators and buyers – to require originators to retain some of the original loan risk on their balance sheets, and require buyers to do due diligence not just at origination, but on-going, just as they would for loans they originated in-house.

- A new investment concentration exposure rule – to limit concentrations in the riskiest investments, similar to the new investment standards for corporate credit unions.

- A revised Credit Union Service Organization risk transparency rule – to provide a clearer picture of the off-balance sheet risks at CUSOs that sell high-risk services to credit unions.

- A targeted interest rate risk management rule – to require credit unions over certain asset sizes and risk thresholds to have an appropriate policy to manage their risk.

Balancing these safety and soundness protections, Matz introduced regulatory relief proposals to reduce credit unions’ compliance burdens: 

- Allowing credit unions to use simple derivatives as an interest rate hedge;

- Allowing credit unions to count subordinated debt toward risk-based net worth and to assign zero-risk weights to most U.S. Treasury securities;

- Extending six of the seven remaining RegFlex provisions to all federal credit unions; and

- Supporting legislative efforts to lift restrictions on member business lending and supplemental capital for credit unions."

Keep in mind, this is NCUA's broad framework and will take time for the rulemaking process to occur.  Some of these rule changes have already been proposed while others have seen recent guidance but not actual regulatory proposals.  This listing should give credit unions a pretty good read on NCUA's intended upcoming rulemakings.

***

NCUA's next Board meeting is this Thursday.  The agenda is available here.