ALEXANDRIA, Va. — NCUA approved a strategic plan for the next four years during its first board meeting of 2014 Thursday, including outlining priorities for the agency through 2017. The board also released its new
Near the top of the list was managing "unprecedented" interest rate risk as the credit union community transitions to a more "normal" rate environment.
Cybersecurity was also near the top of the list of key risks for credit unions, in large part because hackers and cybercrime continue to be threats to CUs and their members.
Along with boilerplate goals such as ensuring safety and soundness of the credit union system, promoting financial literacy, continuing to develop an effective and transparent agency, and more, NCUA outlined a number of other priorities. Those include:
- Providing the regulator with vendor authority via statutory changes to achieve parity with other federal financial regulatory agencies to regulate, examine and enforce actions against vendors and CUSOs.
- Restoring access to back-up liquidity, including re-establishing NCUA's emergency borrowing authority of $30 billion, which was sunset at the end of 2010.
- Improving its ability to manage the Share Insurance Fund by providing increased flexibility to set normal operating levels and build retained earnings for the NCUSIF "in a manner consistent with the size, complexity and risk within the credit union industry."
Other highlights of the meeting:
- The board approved a ceiling of an 18% maximum interest rate on loans for federal credit unions, effective March 11 through Sept. 10, 2015. That ceiling applies to all FCUs, with the exception of those operating under Payday Alternative Loan (PAL) programs, where the ceiling is 28%, though those FCUs must comply with NCUA limits on loan amounts, fees, terms and more.
The agency said that in a rising-rate environment, reductions in that ceiling could impair the earnings of credit unions that rely on loans between 15% and 18% interest. "In a competitive market, loan demand and supply determine the interest rate and loan volume," the agency said. "Imposition of a ceiling below the market rate will shrink loan volume. Interest income on loans is the product of rates and volume; a binding ceiling reduces both."
- NCUA's board approved a rule granting FCUs limited derivatives transaction authority for FCUs with more than $250 million in assets (393 CUs, as of Sept. 30, 2013), while deferring to state authority for state-chartered CUs.
NASCUS noted in a statement that the original rule provided FCUs with the authority to issue simple swaps and caps, pre-empting state authority, limiting state-chartered federally insured CUs to exercising only the authority granted to FCUs.
"In limiting the final rule to federal credit unions, NCUA acknowledges the experience, expertise, and ability of the states to supervise this activity in their state credit unions," said NASCUS President and CEO Mary Martha Fortney. "NASCUS had serious concerns with the rule as proposed, and to NCUA's credit, they engaged in candid and meaningful dialogue with NASCUS and the state regulators about our concerns and NCUA's concerns as well. That state authority has been preserved is not just a benefit to the state system; it preserves dual chartering and that benefits the entire state system."
