September 11, 2019

Hood: 'Smart, effective regulation' needed for CU growth

Hood at Caucus
NCUA Chair Rodney Hood outlined his vision for the NCUA and industry at NAFCU's Congressional Caucus Tuesday. (Photo by Greg Dohler)

Outlining the NCUA's approach to ensuring the credit union industry's future success, NCUA Board Chairman Rodney Hood told the hundreds of attendees at NAFCU's Congressional Caucus that his goal "is to support and expand upon the credit union industry's long commitment of people helping people." NAFCU President and CEO Dan Berger reiterated NAFCU's support of Hood's agenda following his speech.

"Chairman Hood shares NAFCU's commitment to creating an environment in which credit unions can thrive," Berger said. "We appreciate his vision for the NCUA's approach to regulation, which promotes modernizing and clarifying areas that create significant compliance costs for credit unions. NAFCU looks forward to working with Mr. Hood to share credit unions' perspective and accomplish his supervisory priorities."

Adding that the spirit of the credit union industry "… is the core value that serves as the foundation of everything we do, and it's foremost on my mind with every decision I make as NCUA chairman," Hood detailed the NCUA's approach through three perspectives:

What the NCUA is doing

"Regulation needs to be effective but not excessive," Hood stressed, adding that he is committed to reducing regulatory compliance burdens.

"The NCUA has been working steadily to take a closer look at rules that are outmoded, ineffective, or unduly burdensome. That means modifying, updating, or in some cases, eliminating regulations that may no longer fit today's financial system."

He specifically highlighted the NCUA's rule to increase the threshold for commercial real estate appraisals, increase the limit on non-member deposits, provide interim guidance on hemp banking, and – to the applause of the crowd – delay the agency's risk-based capital rule by two years "so that we can explore improvements to it."

In addition, Hood explained the process through which credit unions acquire small banks, which has been questioned in the news recently, and that the NCUA has the authority to phase in the Financial Accounting Standards Board (FASB) current expected credit loss (CECL) standard.

"In particular, I want to thank FASB for listening to our concerns and issuing a second question and answer document that recognizes that 'reasonable and supportable forecasts' required by CECL can be scaled to the size and complexity of the institution and do not necessarily require modeling or economic forecasting," Hood said. "We will continue to work with our partners to provide information and training on these new standards."

What credit unions need to be doing

Noting the financial pressures facing the industry, Hood touted the continued growth the industry has seen related to shares and loans but encouraged credit unions to "avoid temptation to take potentially undue risks."

Hood also stressed the importance of Bank Secrecy Act (BSA)/anti-money laundering (AML) compliance to ensure credit unions "aren't exploited as an avenue for illicit financing," and cybersecurity, encouraging credit unions to "keep working to protect your members' data and to harden your systems against the threat of a costly data breach."

While technology comes with threats, Hood acknowledged the opportunity for innovation and improvements to how credit unions engage with members, analyze data and make business decisions. He encouraged credit unions to be prepared for and to work with regulators on related challenges.

What NCUA, credit unions can work on together

Calling the D.C. Circuit Court of Appeals recent decision in the lawsuit challenging the agency's 2016 field of membership (FOM) rule "a significant step forward," Hood discussed how the industry can continue moving forward through financial inclusion in underserved communities.

"Certainly, in rural America, where so many financial institutions have shut their doors over the last decade, credit unions should be in the position to extend lending and other services that will provide these communities with the oxygen they need to survive," Hood said. "We need fresh thinking on how to address the needs of those communities."

Read Hood's full remarks here. NCUA Board Member Todd Harper is set to address Caucus attendees tomorrow; stay tuned to NAFCU Today and follow #NAFCUCaucus on Twitter for conference updates.