State Regulators Offer Input On Reform Proposals

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During hearings hosted by the House Subcommittee on Financial Institutions and Consumer Credit, NASCUS offered testimony on reforms it said will strengthen the state system of credit union supervision and help to alleviate regulatory burden on state-chartered credit unions.

Virginia Deputy Commissioner of Financial Institutions George Latham testified on behalf of NASCUS and state regulators. "The ultimate goal is to meet the financial needs of consumer members while assuring that the state system is operating in a safe and sound manner," Latham said.

During his remarks, Latham addressed capital reform and urged the Committee to amend the Prompt Corrective Action (PCA) provision of the Federal Credit Union Act, obligating federally insured credit unions to include all forms of capital when calculating the net worth ratio.

"NASCUS endorses and has a longstanding policy of supporting risk-based capital," said Latham. "We support a risk-based plan, such as presented in Title I of H.R. 2317."

In addition to supporting risk-based capital, Latham stressed that NASCUS believes credit unions should have access to alternative capital, a complement to the proposed risk-based system. Latham noted that even with the lower leverage ratios and risk capital presented in H.R. 2317, some state-chartered credit unions might not be able to rely on retained earnings to meet the capital base required by PCA.

Support For CURIA

"As a regulator, it makes sound economic sense for credit unions to access other forms of capital to improve safety and soundness," said Latham.

Latham also recognized and expressed appreciation that a provision similar to H.R. 1042, the Net Worth Amendment for Credit Unions Act, is included in H.R. 2317, CURIA. NASCUS testified in April in front of this Subcommittee on H.R. 1042, a bill that would eliminate the unintended consequences of FASB 141 on credit union mergers.

Latham also stated NASCUS' support for Section 201 of CURIA, which raises the statutory limit on credit union member business loans to 20 percent of total assets. Further, NASCUS also supports Section 202, amending the definition of a member business loan by increasing the current amount of $50,000 to $100,000.

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