In what is probably his final appearance before Congress as NCUA Chairman, Dennis Dollar called on lawmakers last week to expand the work he started at NCUA by cutting back more of the regulatory burden on credit unions.
Dollar, whose six-year term on the NCUA Board officially expires next week, told members of the House Financial Services Subcommittee on Financial Institutions the credit union regulator endorses a broad slate of reforms that would slash credit unions regulations and give them greater authority over their own activities-a major goal of his during his two years as head of the federal agency.
The regulatory relief proposal endorsed by Dollar would expand field of membership (FOM) and merger powers for federal credit unions and give NCUA, instead of Congress, the ability to ease restrictions on loan maturities, investments in CUSOs, and permissible investments. It would also, for the first time, allow federally chartered credit unions to provide limited services aimed at low-income Americans, specifically check cashing and wire transfers, to non-members within a credit union's FOM.
Regulatory relief will be the main legacy Dollar leaves behind when he exits NCUA. The NCUA Chairman championed the cause with his own regulatory flexibility, or Reg-Flex initiative, which exempted thousands of financially healthy credit unions from certain regulations and has served as a model for similar initiatives in state agencies and other financial regulators.
Dollar told members of the financial services panel last week the time is ripe for further easing on credit unions. "It's been five years since Congress has thoroughly reviewed our statute," he said. "Review and relief in this statute is both necessary and timely."
Dollar neglected to weigh in on two key issues, including the burning proposal to allow federally insured credit unions to offer secondary capital instruments and to count them as net worth under NCUA's prompt corrective action (PCA) minimum capital rules. He also did not express an opinion on the proposal to allow privately insured credit unions to join the Federal Home Loan Bank System, but said if the provisions pass, NCUA does not want the proposed role of monitoring the provisions of the law.
State Regulators Differ
State credit union regulators differed from Dollar on those two issues and endorsed both proposals. North Carolina credit union supervisor Jerrie Lattimore, chairperson of NASCUS, told committee members that the mass influx of new shares the past two years has diluted credit unions' net worth, providing them with stark options, unless allowed to offer secondary capital.
Those options include constricting their expansions, converting to another form of financial institution allowed to count secondary capital, or raising secondary capital without the ability to count it as net worth.
A provision allowing for secondary capital was discussed briefly last year but was never included in the regulatory relief bill.
However, at least one lawmaker is expected to try to get it included this year when the committee conducts its formal mark-up, or drafting session.
Lattimore also asked that Congress provide parity for credit unions with S&Ls on member business loan (MBL) allowance by raising the MBL limit for federally insured credit unions from the current 12.25% (of assets) to the 20% sought by the S&L lobby in the reg relief bill; and by raising the limit for loans counted as MBLs from the current $50,000 to the $327,000 conforming loan limit set by Fannie Mae and Freddie Mac.
A provision of the existing relief bill would raise the MBL cap only slightly by exempting religious-based loans from the limit. But the credit union lobby is expected to launch an effort to get the cap raised.
The two credit union regulators testified on a panel that also included a representative from the Federal Reserve Board, the FDIC, the Comptroller of the Currency, Office of Thrift Supervision, and the Conference of State Bank Supervisors.
Congressional leaders have said they want to move the bill rapidly and get it to the floor of the House soon, possibly by the end of April. Senate leaders are currently drafting their own version of a reg relief bill, too.