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In its annual report released last week, the Financial Stability Oversight Council (FSOC) made several NAFCU-supported recommendations to ensure the U.S. financial system is prepared to handle risks and consumers are protected. However, it also suggested that the NCUA have third-party vendor oversight authority, to which NAFCU is opposed.

Some of the recommendations in the report include:

• Cybersecurity: FSOC encouraged regulators to work with other government agencies and private entities "to enhance financial sector capabilities to mitigate vulnerabilities and maintain a strong cybersecurity posture." NAFCU has been a leader in calling for strong national data security standards; the association was the first group after the massive 2013 Target data breach to call for a legislative solution to reform the nation's data security system. In addition, FSOC recommended giving NCUA third-party vendor authority due to risks associated with firms providing data services. NAFCU supports strong cybersecurity protections, but has opposed granting NCUA such authority, arguing that granting such authority is unnecessary, costly and would not necessarily result in better supervision of credit unions.

• Housing finance reform: The report noted that housing finance reform "is urgently needed to address the conservatorships [of the government-sponsored enterprises (GSEs)], codify existing reforms, and implement a durable and vibrant housing finance system." It also included support for ongoing efforts, such as credit risk transfers, the development of the common securitization platform (CSP) and uniform mortgage-backed security, and the GSEs rebuilding their capital buffers. Last week, NAFCU witness Rick Stafford offered support for many of these efforts during testimony before the House Financial Services Committee, and also stressed the need to ensure credit unions' access to the secondary mortgage market in any housing finance reform.

• Regulatory reform: FSOC recommended federal and state regulators better coordinate efforts and "evaluate regulatory overlap and duplication, modernize outdated regulations, and, where authority exists, tailor regulations based on the size and complexity of financial institutions." NCUA recently announced a pilot program in which it and six participating state regulators will alternate exam approaches. NAFCU has urged the agency to increase flexibility in examinations in order to reduce burdens and realize cost-savings.

The report also touched on issues related to fintech and financial institutions' capital and liquidity levels. NAFCU has urged lawmakers and regulators to ensure a level playing field between fintech companies and financial institutions, from data security to consumer protection. The association has also cautioned against loosening regulations on big banks, such as the Volcker rule, as doing so could undermine financial stability.

FSOC members include the NCUA, Bureau of Consumer Financial Protection, Federal Housing Finance Agency, Treasury Department, Federal Reserve, Office of the Comptroller of the Currency, Securities and Exchange Commission, FDIC, Commodity Futures Trading Commission, Office of Financial Research and Federal Insurance Office.