McWatters Outlines Plan for 'Thoughtful Loosening' of Regulation

​NCUA Acting Chairman Discusses Possible Stabilization Fund Closure in 2017

WASHINGTON – In his first address since his designation as Acting NCUA Board Chairman, J. Mark McWatters informed credit unions they can anticipate a “thoughtful loosening” of regulations, a streamlined agency budget, and the possible closure of the Temporary Corporate Credit Union Stabilization Fund in 2017.

“NCUA should acknowledge that it’s 2017, not 2008, and that it is time to consider the thoughtful loosening of the regulatory regime appropriately placed on the corporate credit unions during the darkest days of the financial crisis,” McWatters said. “We must focus on today’s challenges and risks while preparing for the future. Absent safety and soundness concerns, NCUA must not stand in the way of your efforts to develop and execute your business plan, meet the expectations of your members, and build a robust and dynamic credit union community.”

McWatters spoke to a crowd of approximately 5,000 people at the Credit Union National Association’s annual Governmental Affairs Conference. The full speech text is available online here.

McWatters also addressed the possibility of the agency’s closing the Temporary Corporate Credit Union Stabilization Fund in 2017—four years before the currently scheduled closing—and moving money into the Share Insurance Fund in order to avoid charging a premium. NCUA has projected the Share Insurance Fund’s equity ratio, already below the 1.30% operating level, will continue to decline, and staff last November projected a possible premium of three to six basis points.

“It is important the agency maintain a strong Share Insurance Fund and avoid or minimize any premiums, whenever we can do so responsibly,” McWatters said. “We have a potential opportunity to accomplish both by closing, in 2017, the Stabilization Fund into the Share Insurance Fund.

“I must emphasize there are accounting, legal and financial issues that we must thoroughly research and evaluate before the Board may vote to close the Stabilization Fund,” McWatters said. “In addition, the Share Insurance Fund would need to hold sufficient reserves to absorb the downward trend in the equity ratio and potential declines in the value of the legacy assets. If our research determines the agency can properly and prudently satisfy these requirements, I will support closing the Stabilization Fund into the Share Insurance Fund in 2017.”

If conditions permit, McWatters said, NCUA would begin a multi-year process of rebating Stabilization Fund assessments to credit unions, adding this would be his top priority for 2017.

McWatters described 15 issues he wants to address to reduce regulatory burdens while ensuring safety and soundness in the credit union system, including:

  • Revisiting the agency’s pending risk-based capital rule, scheduled to go into effect in January 2019;
  • Continued review of an extended examination cycle;
  • Re-evaluation of the stress-testing rule for the largest credit unions;
  • Streamlining the agency’s budget; and
  • Doing more to help credit unions serve members better.

“NCUA must faithfully execute our duties as a prudential regulator while ensuring the safety and soundness of the Share Insurance Fund and the viability of the credit union system,” McWatters said. “Nonetheless, we must slow, if not substantially stop, the machine that grinds out a relentless flow of new regulatory burdens. We must also do much more to improve how we regulate and consider the costs, as well as the benefits, of each new regulation.”

in Compliance & Regulatory News