McWatters ran down 10 areas NCUA is examining for regulatory reform, including stress testing, the appeals process, voluntary merger rules, alternative capital, member business lending and more.
He also touched on an executive order from President Trump that covers how regulatory agencies are structured.
“We are looking at the structure of NCUA from top to bottom,” said McWatters, “finding areas that could make the organization more efficient and more transparent. We have five regions now, we are considering having either more or fewer regions to increase efficiency. The 5300 call report – every time we add a line to that it is a hassle for someone because they have to reprogram their systems. We are going to simplify call reports. We will do more virtual examinations as part of a rethought examination process. We want to form advisory committees.”
The National Credit Union Share Insurance Fund’s equity ratio is trending down, “which is a problem,” McWatters said, because it could lead to an assessment for the credit union industry. At the same time, NCUA has the Stabilization Fund, whose underlying assets are growing in value. NCUA has recovered $5 billion gross related to lawsuits, but has paid $1 billion to lawyers, “which is a very sore subject to me. But that is what the contract says and they refuse to renegotiate.”
“The Share Insurance Fund cannot borrow from the Stabilization Fund,” McWatters said. “There is a possibility of merging the two together, which would solve several problems. Philosophically it seems like a good solution, but the problem is the accounting is difficult. We are making progress on this, it is tricky.”
Fraud accounts for about half the losses in the Share Insurance Fund, so NCUA is developing regulations to combat the problem, McWatters continued. He said the agency is concerned about cybersecurity and also is working to address that issue. “Chartering a credit union is a complete nightmare, so we are working on that. We are talking with the CFPB to try to get credit unions exempted from new HMDA requirements.”
“Rick Metsger and I work together very well. We do not agree on everything. We are two-person board, split one D, one R, and if we were like the rest of Washington we would be deadlocked. We negotiate on what is the best for credit unions.”