WASHINGTON -- The National Credit Union Administration plans to tighten regulation of the industry's liquidity centers and investments, Chairman Norman E. D'Amours told Congress on Thursday.
Mr. D'Amours also plans to ask the next Congress for expanded powers, which might include setting minimum capital standards for credit unions.
"I believe that the time to plan and look ahead is now, when the credit union system is healthy and strong," Mr. D'Amours said,
Mr. D'Amours was testifying at the first of two hearings on credit unions called by House Banking Committee Chairman Henry B. Gonzalez. Thursday's hearing dealt with the industry's health; a hearing Oct. 6 will focus on regulation of corporate credit unions.
The hearings were spurred by disclosures this year that U.S. Central Credit Union had invested $255 million in a troubled Spanish bank.
Rep. Gonzalez backed the agency's proposal to bar corporates and the Credit Union National Association from sharing managers. Without these new limits, the trade group and its affiliated state leagues will continue their "de facto control of the industry's liquidity," the Texas Democrat said.
'"We all know the dangers of a trade association having too much of a sway over an industry, and I am fully supportive of the [NCUA] chairman' s efforts to distance the corpotale credit unions from trade association domination," Rep. Gonzalez said in his opening remarks.
Mr. D'Amours said the agency also will be considering tougher capital and investment regulations for corporates.
"We will be working towards establishing special limitafious on derivative inveslments ... based on a percentage of capital," Mr. D'Amours said. The agency also will implement new disclosure requirements on derivatives and require credit union boards to approve management's derivatives activities.
Rep. Gonzalez said it was "inspiring" that the NCUA was addressing these types of investments.
Thomas J. McCool, an associate director for the General Accounting Office, was the only other witness.
He said that credit unions are more subject to interest risk than when the GAO studied them in 1991, because many institutions have put money in longer-maturity investments.
"I don't want to make it to sound like a problem, but it's an area that deserves regulatory attention," Mr. McCool said.
Mr. McCool made several recommendations to Congress. Among them: require the NCUA to establish minimum capital standards for credit unions and require corporates to be federally insured.
These steps may have the regulator's support. Mr. D'Amours' testimony said the agency will push for legislation in the 104th Congress that will include suggestious from the 1991 GAO report.
Expanding the Community Reinvestment Act to credit unions was raised by Rep. Joseph P. Kennedy 2d, D-Mass., and Rep. Alfred McCandless, R-Calif.
"The time has come for your guys to come under the umbrella of CRA," said Rep. Kennedy.
"You're dead wrong," Mr. D'Amours shot back. He said credit unions fulfill the spirit of CRA, because they lend only to their depositors.
However, the NCUA chairman said, it may be appropriate for his agency to examine credit unions to ensure they aren't discriminating.
