CUNA Comment Letter
NCUA Strategic Plan for 2003-2008
July 12, 2002
Mr. James Patrick
Director of Strategic Planning
National Credit Union Administration
Office of Strategic Program Support and Planning
1775 Duke Street
Alexandria VA 22314
Dear Mr. Patrick:
The Credit Union National Association is pleased to comment on the agencys proposed Strategic Plan for 2003-2008. CUNA represents over 90% of our nation's more than 10,500 state and federal credit unions. The comments in this letter were developed under the auspices of CUNAs Examination and Supervision Subcommittee, chaired by South Carolina Credit Union League President John Franklin. CUNAs Examination and Supervision Subcommittee looks forward to meeting with you in July to discuss the agencys plans and our views on it. In the meantime, there are several key points we would like to emphasize regarding the plan.
Summary of CUNAs Views
- In general, the plan is a useful resource for credit unions. The five strategic goals are very significant for the future of the credit union system and thus, highly appropriate for the agency.
- NCUA should remove provisions in the plan that seek to encourage certain credit union behavior that goes beyond safety and soundness issues.
- The document does not integrate the agencys crisis management planning efforts following September 11, 2001. We believe this addition would be beneficial for credit unions to understand better how such crisis management fits into the overall strategic planning process.
- The plan should include more guidance for credit unions on the agencys goals and objectives for risk-focused examinations.
- The plan should specifically address the Reg-Flex program under Goal #3, regulatory environment, as one key mechanism to promote flexibility for well-managed federal credit unions.
- The plan should be more expansive in its discussion of state chartered federally insured credit union issues that relate to safety and soundness.
NCUA Plan Is a Useful Resource for Credit Unions
Under the Government Performance and Results Act, the National Credit Union Administration and other federal regulatory agencies are required to develop a strategic plan, as well as an annual performance plan that explains how the agency will implement its strategic goals.
In general, we found NCUAs Strategic Plan 2003-2008 to be useful and an important resource that will enable the credit union system to understand more thoroughly the agencys priorities, the steps its plans to take to implement its goals, and its allocation of resources. We also think that the five strategic goals that the agency has identified -- financial health of the credit union system; safe integration of technology; flexible regulatory environment; credit union growth and empowerment; and efficiency at the agency are critical to the success of the agency as well as to the entire credit union network and thus, are appropriate goals on which to focus agency resources.
We do have some recommendations that we believe will clarify the agencys intent, thus making a good product even better.
The Plan Reflects a Proactive Approach for NCUA Beyond Safety and Soundness
In several areas, the plan reveals the agency's intent to develop programs and initiatives that we believe are beyond its purview as a regulatory agency. While many of the goals and ideals addressed in the plan are laudable, we do not believe it is NCUA's role to undertake them. Because of the unique relationship of NCUA as a credit union regulator, the agency should confine its involvement to safety and soundness, empowering credit unions, and expanding earned regulatory flexibility as opposed to any activity involving the establishment of credit union priorities.
Examples of goals that illustrate this point are:
- Enhance information sharing capability of Information Systems and Technology best practices among examiners, credit unions and trade associations through group meetings, regional intranet sites and participation in sessions provided by the trade associations.
- Provide appropriate guidance to CUs regarding developing technology plans, minimum due diligence expectations and best practices through annual letters to CUs, NCUA website information, and links to other informational websites. (It is our feeling that rather than determining the level of technology a credit union should utilize, NCUA should facilitate a credit unions ability to decide for itself the level of technology it would like to utilize.)
CUNA believes that in NCUAs proper role as a regulator of safety and soundness, the agency should focus on and limit its guidance to risk-related issues.
The Plan Should Incorporate the Agencys Crisis Management Planning Efforts
Since September 11, 2001, the entire nation has become much more aware of security and safety issues in the workplace, as well as in other environments. Like other agencies, NCUA has developed and made use of resources that will help it address crisis situations on a broad scale both within the agency as well as throughout the credit union system, should such events occur. We believe it would be highly useful for the agency and for credit unions if the Strategic Plan incorporated NCUAs crisis management goals and objectives, and addressed the resources that would be diverted to deal with such events.
Specific Goals and Strategies for Risk-Focused Examinations Should Be Included
Beginning in September 2002, NCUA will initiate a risk-focused process to examine federal credit unions. The risk-focused examination (RFE) process is an approach designed to allocate agency resources to the credit unions and areas exhibiting weaknesses or adverse trends. Examiners will evaluate both credit union performance and managements ability to identify, measure, monitor, and control risk. State regulators will also be utilizing this RFE process.
The Strategic Plan does reference the RFE process under Strategic Goal #1 and in other provisions in the plan. However, because this initiative will have such a significant impact on credit unions, we believe it is important for NCUA to include its specific goals and the strategies it intends to implement with regard to risk-focused exams.
Language in the Human Capital Management Plan Should Be Clarified
While it would seem evident that NCUAs goals and strategies in the area of management and human capital are intended to apply only to the agency itself, the language in the Strategic Plan is not always clear on this point. CUNA feels strongly that NCUA should not be involved in individual credit union management and human capital issues unless they were truly safety and soundness issues. Therefore, CUNA recommends that the language in the plan be clarified to indicate that the goals and strategies in the Appendix pertain solely to human capital issues at NCUA and not to individual credit unions.
The Plan Should Incorporate Specific Goals and Objectives for Expanding the Reg-Flex Program for Federal Credit Unions
CUNA continues to maintain that one of the most important regulations adopted for federal credit unions in recent times is the Reg-Flex rule initiated by Chairman Dennis Dollar. The rule and its potential for even more flexibility for federal credit unions signaled a real desire on the part of the agency to support innovations at federal credit unions that are well-managed. We urge the agency to include greater details in its objectives, for example under Strategic Goal #3 regarding regulatory flexibility, to provide further direction to agency personnel as well as to federal credit unions regarding additional review and consideration of expanded Reg-Flex authority.
The Plan Should Address Issues for Federally-Insured State-Chartered Credit Unions
There is relatively little discussion in NCUAs Strategic Plan regarding state-chartered federally-insured credit unions (FISCUs). Given the concerns in the credit union industry about bureaucracy, efficiency, and fairness with regard to FISCUs, CUNA suggests that NCUA modify its plan to further address this important issue.
Increased Agency Efficiency
We believe the Strategic Plan provides a number of goals and objectives to enhance the agencys efficiency. However, we also believe there should be greater reporting to credit unions regarding the extent to which the agency is meeting those goals. For example, the agency has stated that the risk-focused examinations will provide for greater efficiency in the examination process and enable the agency to contain costs related to supervision. We urge NCUA to put in place a system for regularly reporting to credit unions on the extent to which those goals are being met and costs are held constant or reduced.
Thank you for the opportunity to provide our views on NCUAs Strategic Plan for 2003-2008. We strongly believe that the plan is a key document that should present the agencys appropriate role as a safety and soundness regulator, while affording credit unions the latitude they must have to make their own decisions and determine for themselves what activities are in the best interests of their members. We urge you to revise the plan as detailed above to reflect that vision. Please do not hesitate to contact me at (202) 508-6736 or at firstname.lastname@example.org if you have any questions about our comments.
Mary Mitchell Dunn
Associate General Counsel