September 12, 2019

NCUA's Harper warns NAFCU members of risks facing CU industry

NCUA Board Member Todd Harper spoke shared insights to the agency's regulatory approach and issues facing credit unions at NAFCU's Congressional Caucus Wednesday. (Photo by Greg Dohler)

NCUA Board Member Todd Harper addressed the crowd of hundreds of credit union leaders at NAFCU's Congressional Caucus Wednesday, explaining his perspective on the agency's approach to regulation, priorities, and risks related to liquidity, consumer debt, and the growing federal deficit.

A financial regulator, Harper said, should be fair, forward-looking, innovative, inclusive, independent, risk-focused, ready to act expeditiously, and engaged with all stakeholders.

Specifically, Harper discussed the NCUA's innovation related to exams using the MERIT system to conduct more effective reviews of credit unions. He also said the agency is focused on protecting itself "from outside political interference" and noted how it's using Inspector General reports to address issues.

Harper said the NCUA is committed to mitigating risks and not approaching regulation through a one-size-fits-all lens. In order to learn about major concerns, he said the agency is actively engaged with stakeholders.

“It’s the conversations I’m having with credit unions that give me an idea of where we need to go over time,” Harper said as he shared a story that led to his support of the NCUA's non-member deposits proposal.

Harper also addressed risks on the horizon, emphasizing the need to have foresight heading into 2020. His priorities for the agency – focused on safety and soundness, consumer financial protection, and promoting thrift and serving people of modest means – will help the NCUA and credit unions prepare for them.

With the potential of a coming recession, Harper warned of potential issues with credit unions' liquidity and high consumer debt.

“To maintain their middle-class lifestyles, many families are taking out loans and accruing debt,” Harper said, adding that credit unions should prepare for the negative effect of increased delinquencies during a downturn. "Credit unions should make good loans and hedge risks."

Finally, Harper said NAFCU members should keep an eye on the growing federal deficit, which would pose risks to the nation's overall economic stability.

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