Every year is eventful, but for NCUA, 2015 has, perhaps, been more noteworthy than usual.
And the regulator has the comment letters to prove it.
After it unveiled a revised risk-based capital plan in January, NCUA received a record 2,167 letters, most from credit union executives critical of the plan.
The mark held for just five months.
Sweeping planned changes to member business lending rules prompted a whopping 3,088 missives—the majority not from credit unions, who were largely pleased with the proposal, but from bankers angry at the prospect of more competition for business loans.
Looking back, it is clear Chairman Debbie Matz meant what she said at CUNA's governmental affairs conference in March, when she pledged 2015 would be "the year of regulatory relief."
Lucy Ito, president and CEO of the National Association of State Credit Union Supervisors, called 2015 "a whopper of a year in terms of activity coming out of NCUA."
In April, the board streamlined rules governing common bond CUs, granting automatic approval to applications involving 12 types of groups, including electric cooperatives, labor unions, scouting groups, parent-teacher organizations and booster clubs.
In July it eliminated a cap on the amount of fixed assets a credit union is able to hold.
In September, it changed the definition of "small credit union," doubling the asset threshold to $100 million.
Those were relatively modest, long-sought reforms. Much of the year, however, has been spent working on rewrites to a series of big-ticket regulations, some of which are still pending final votes.
The year's biggest event came in October, when—after months of contentious debate—a split board approved a major regulatory initiative establishing a risk-based capital structure to go alongside the statutory net worth-based capital requirement.
The rule, which takes effect in 2018, is designed to require "risky outliers" with higher-than-average risk profiles to hold more capital. At the time of the vote, NCUA estimated just 16 credit unions would be required to add capital if the rules had gone into effect immediately. However Larry Fazio, director of the agency's office of examination and insurance, noted that the 16 institutions have a combined $10 billion in assets.
Critics of the plan, including CUNA and NAFCU argued NCUA lacks authority to implement a risk-based capital regime.
In addition to risk-based capital, NCUA has also started work on sweeping changes to regulations governing member business lending, field of membership and secondary capital—setting the stage for a number of high-profile votes in 2016.
Among other things, the MBL proposal includes language that would scale back the limit on loan-to-value ratios for business loans, eliminate a provision requiring borrowers to personally guarantee their loans, and increase the amount a credit union can lend to one borrower. It also eliminates a stipulation that loan officers have at least two years of business lending experience.
The FOM proposal, which took an in-house task force 11 months to formulate, offers CUs several new options. For the first time, it lets CUs use combined statistical areas with populations of up to 2.5 million people, or entire congressional districts, to delineate a community.
The proposal also lets CUs designate a portion of a core-based statistical area with a population of up to 2.5 million as a community for FOM purposes. Under current rules, credit unions can only serve an entire core-based statistical area if the area as a whole is home to less than 2.5 million people.
NASCUS' Ito said in an interview Thursday an overhaul of field of membership regulations was "long overdue." "We've been encouraging them [to act] for a long time, so 'well done' on that," she said.
Ito characterized the proposed MBL changes as "rather progressive."
Former chairman Michael Fryzel said the "flurry of activity" undertaken by NCUA in 2015 would have a lasting impact.
"It has paved the way for an even more exciting 2016 as the issues of field of membership, member business lending and supplemental capital will be addressed," Fryzel said in an email Wednesday.
Another former chairman, Dennis Dollar, expressed reservations about the risk-based capital rule, but said the board had done yeoman's work for the most part.
"Overall, the announced year of regulatory relief has had some steps forward like the fixed asset rule and some steps backward like risk-based capital, but overall I think the trajectory from NCUA has been quite positive from a credit union perspective in 2015," Dollar said in an email. "If they can come forward with truly meaningful reforms in the member business lending rules and progressive modernization of the field of membership rules in early 2016, I think history will be kind to its look at 2015."
Matz even received grudging praise from an unlikely source. "Debbie Matz said she was going to [provide relief], and she delivered," Keith Leggett, a retired American Bankers Association economist and an author of a blog frequently critical of the credit union industry, said Thursday.
But 2015 also witnessed the shattering of consensus among the NCUA board members, who clashed publicly over a number of major issues, as well as significant blowback from bankers angry at the possibility of expanded fields of membership and more credit union competition for business loans.
Camden Fine, president and chief executive of the Independent Community Bankers of America, said his group was considering filing suit over the field of membership rules.
"NCUA is trying to make credit unions the functional equivalent of banks – except banks pay taxes," Fine said in an interview last month.
According to Leggett, bankers believe the proposed changes to field of membership rules go far beyond NCUA's authority.
"When you talk about combined statistical areas, how does that comport with a field of membership being well-defined and local, which is what the law requires," Leggett asked. "A combined statistical area is a region."
Leggett also expressed concern that changes to the MBL regulation would make credit unions even fiercer competitors for small business loans, community banking's bread-and-butter business.
Ito said she could understand why bankers are upset. "I know there are other interest groups out there," she said. "But NCUA and state regulators need to focus on what benefits consumers," she said.
For her part, Matz said the course NCUA set in 2015 reflected a need to move away from the hands-on regulatory approach it employed during the financial crisis.
"As credit unions' performance metrics returned to levels we saw before the financial crisis, NCUA's has provided relief or proposed changes to certain regulations to give credit union executives and boards more discretion," she said in an email Thursday. "As a result, credit unions and NCUA can focus resources on achieving our respective missions."
