Congress should consider giving the NCUA more flexibility to write rules to provide regulatory relief and allow credit unions to offer more services, Acting NCUA Chairman J. Mark McWatters told the Senate Banking Committee Thursday.
And he told the committee that he opposes a plan by the Trump Administration to eliminate the Community Development Financial Institution program.
The regulatory burdens that credit unions face are particularly acute at small financial institutions, McWatters said. He said rules should be written to take into account the size and type of financial institution being regulated.
“Regulations should be tailored with a laser and not a shotgun,” he told the committee.
McWatters asked Congress to modify the Federal Credit Union Act to give the NCUA the power to streamline field of membership changes and allow all federal credit unions to increase their membership by adding underserved areas.
“The Federal Credit Union Act contains a number of provisions that limit the NCUA’s ability to revise regulations and provide relief to [small] credit unions,” McWatters told the panel during the committee’s latest hearing on fostering economic growth.
McWatters said those rules include limitations on the eligibility of credit unions to obtain supplemental capital, limits on fields of membership, investment limits and the general 15-year loan maturity limit.
“To that end, the NCUA encourages Congress to consider providing regulators with enhanced flexibility to write rules to address such situations, rather than imposing rigid requirements,” McWatters said. “Such flexibility would allow the agency to effectively limit additional regulatory burdens, consistent with safety and soundness considerations. “
He said Congress also could consider eliminating the provision that requires a multiple-bond credit union to be within a “reasonable proximity.” And he said Congress could consider providing explicit authority for web-based communities as a basis for a credit union charter.
But Sen. Tom Cotton (R-Ark.) bristled at the notion that regulators be given more flexibility.
“None of you are here because you have been elected,” he said, adding that too often members of Congress leave too much up to regulators to interpret rules.
“Many congressmen and senators like to punt the ball to regulators,” he said.
McWatters reiterated his intention to conduct a comprehensive review of the call report process, as well as the agency’s examination process.
He said that the agency’s Enterprise Solutions Modernization Program will help provide the agency with the necessary tools to accomplish that. He said the agency will consider the feasibility of incorporating a virtual examination process.
He also made a commitment to review the final risk-based capital rule and to consider whether significant changes should be made or if the rule should simply be repealed.
McWatters gave a limited endorsement to requiring cost-benefit analyses for major regulations. “We have to be thoughtful about this,” he said, adding that “It’s an art rather than a science.”
He said regulators must be careful to ensure that any cost-benefit analyses are based on effective standards.
And he endorsed efforts to establish a Credit Union Advisory Council, saying that such a panel would enable the agency to “listen to and learn from industry representatives more directly, enhancing our efforts to identify and eliminate unnecessarily burdensome, expensive, or outdated regulations.”
Asked by Sen. Robert Menendez (D-N.J.) whether he supports the Trump Administration plan to eliminate the CDFI program, McWatters delivered a one-word answer: “No.”
During the hearing, Banking Chairman Mike Crapo (R-Id.) reiterated his desire to produce bipartisan legislation to enhance economic growth.
“One of my key priorities this Congress is passing bipartisan legislation to improve the bank regulatory framework and promote economic growth,” he said.
But unlike Crapo, Banking Committee ranking Democrat Sherrod Brown of Ohio did not praise the recent Treasury Department report on how to best regulate community banks and credit unions.
He called that report a “Wall Street wish list,” adding that Treasury missed the opportunity to write a report that genuinely encourages economic growth.
