NASCUS Sees Growing State, Federal Divisions

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NASCUS Chairman Roger W. Little said his group's priorities for the coming year are being driven more than ever before by differences in state and federal chartering powers.

Little offered the insights in remarks before the NASCUS/NCUA State Regulators Conference here.

"We understand that the state system can only thrive if the whole credit union community, both federal and state chartered, is safe, sound, and effectively regulated," said Little. "We do not believe the state system will succeed at the expense of the federal charter, nor should it. "

Here's what Little had to say about each of those priority points:

Taxation: "Over the past several years, a divide and conquer strategy focusing on increased taxation of state-chartered credit unions has become a primary objective of many credit union competitors," said Little. "And unless we are successful in warding off competitive attacks, the dual chartering system for credit unions could be in jeopardy. State-chartered credit unions in states where increased taxation has become a political issue will contemplate converting to a federal charter simply to assure increased stability in their operations. Charter conversion simply to escape taxes is inappropriate, at best, and concerns all elements of the credit union community."

Similarly, Little noted the threat state-chartered CUs face on UBIT, but added that an issue that relates only to state credit unions is likely to end up as a challenge for the dual chartering system, and, ultimately, all credit unions, regardless of charter.

* Capital Reform: "Several state regulators already allow alternative forms of capital," observed Little. "These progressive state approaches should be a starting point for developing additional capital options for all credit unions. We understand the arguments for a risk-based PCA requirement, and we support that as well, but capital reform will not be complete until credit unions are able to generate alternative capital."

* NCUA/NCUSIF Administration: Little reiterated NASCUS' desire to see a separation between NCUA and the management of the NCUSIF. "It must be clarified, finally, exactly what it costs to supervise federal credit unions and what it costs to underwrite the liability of federally insured credit unions," he told the group. He emphasized two related points: NASCUS does not support NCUA's losing its status as an independent federal regulatory agency, and does not support NCUSIF being absorbed by the BIF/SAIF insurance funds.

In addition, he again called for one of the three NCUA Board members to have state credit union regulatory experience.

* Federal Preemption of State Law and Regulation: Little said an ongoing NASCUS priority is the defeat of efforts to preempt the authority of state legislatures to empower state credit unions and their regulators. "The diversity among state programs is a source of strength, and should be jealously guarded," he said. "Without it, many opportunities for innovation by forward thinking credit union leaders will be lost."

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