WASHINGTON — NCUA Chairman Michael Fryzel told lawmakers contemplating the merger of all financial institution regulators into one that he believes if that plan comes about, Congress must maintain an independent office that would focus solely on credit union supervision.
"Credit unions are fundamentally different in structure and operation than other types of financial institutions...Our strong belief is that these unique and distinct institutions require unique and distinct regulation," Fryzel told members of the Senate Banking Committee during last week's hearing on modernization of bank regulation and supervision.
The chief credit union regulator noted some of the differences between cooperatively structured CUs and for-profit entities, including an interest-rate cap instituted by NCUA and supervisory committees maintained by federal credit unions and most state charters.
The consensus among financial regulators testifying last week was that the separate federal agencies should be combined for efficiency and cost-cutting and to provide uniformity in consumer protection and oversight of financial products.
Sheila Bair, chairman, FDIC, recommended that Congress establish a resolution regulator that will oversee troubled entities and resolve their futures with respect to consumer deposits or other obligations.
She also recommended that Congress and the regulators scrap the time-worn theory of "too big to fail" which has resulted in the federal government pouring hundreds of billions of dollars into failed institutions like Citibank, American International Group, and more recently U.S. Central Federal Credit Union, which has received a $1 billion bailout to be paid by the entire credit union industry.
NCUA's Fryzel said if Congress were to establish an overall financial institutions regulator he hopes a credit union-specific supervisor would continue to manage the National CU Share Insurance Fund, the cooperative deposit insurer that only covers deposits of credit unions. He said the credit union fund should remain separate and independent from other funds insuring deposits for banks and thrifts. "Whatever recommendation Congress contemplate, the (NCUSIF) should remain overseen by the credit union regulator," he said.
Like the FDIC's Bair, Fryzel also endorsed creation of a federal oversight entity-a resolution regulator-charged with establishing general safety and soundness standards, issuing principles-based guidance and monitoring systemic risk. Under this proposal NCUA and other regulators would still be responsible for enforcement, and an independent NCUA and NCUSIF.
