CUNA Comment Letter
Strategic Plan for the NCUA for the years 2000-2005
December 3, 1999
The Honorable Norman E. D'Amours
National Credit Union Administration Board
1775 Duke Street
Alexandria, VA 22314-3428
Dear Chairman D'Amours:
You have asked for input from the Credit Union National Association regarding the proposed Strategic Plan for the National Credit Union Administration for the years 2000-2005, and we appreciate the opportunity to share our views with you on this critically important matter. CUNA's Examination and Supervision Subcommittee and our Governmental Affairs Committee have reviewed the Strategic Plan, and their views are reflected in this letter. CUNA represents over 90% of the nation's more than 11,000 state and federal credit unions.
Summary of our Views
The strategic plan correctly reflects a number of challenges facing the credit union system. However, the plan also proposes responses from the agency to current and emerging concerns that we believe are misguided and beyond the scope of NCUA's mission as a safety and soundness regulator. At the same time, in some areas the plan indicates an intent to boost the agency's authority over federally insured credit unions and third parties in manner that we feel is unjustified, given the vitality of the credit union system. The plan reflects a consistent effort to convert social policy issues into safety and soundness matters. We believe this is an ill-advised attempt to expand historically sound concepts of safety and soundness into unprecedented fields of agency oversight.
We urge the agency to revise the plan in a number of key areas to bring back into focus the mission of NCUA that we believe Congress intended -- ensuring the safety and soundness of credit unions without undue interference in their operations. We also urge the agency to utilize prompt corrective action as a mechanism to minimize resources directed toward healthy credit unions and allow the agency to concentrate more completely on problem areas.
It is clear from reading the proposed strategic plan that considerable time and effort have been expended in its development. We particularly commend the agency for seeking to bring more economic analysis to bear on agency decisions, for attempting to address regulatory flexibility in some areas, and for reaching out to individuals within the credit union system, including CUNA staff, to discuss current concerns as a starting point for the development of the plan.
Nonetheless, as detailed below, we are troubled by the vision of NCUA that is reflected in the plan, as well as many of the assumptions it incorporates.
NCUA's Mission Statement Is Too Broad
The Strategic Plan presents NCUA's Mission on page 8. This mission statement is of the utmost importance because it is the foundation upon which the agency's programs, focus and direction rest. The Mission Statement provides:
Our charge is to foster the safety and soundness of federally insured credit unions and to work with the credit union community to extend credit for productive and provident purpose to all Americans, particularly those of modest means. We strive to ensure that credit unions exercise sound management practices and are empowered to make the necessary business decisions to serve the diverse needs of their members and potential members. We do this by establishing a regulatory environment that encourages innovation, flexibility and continued focus on attracting new members and improving service to existing members.
While the Mission Statement includes safety and soundness, it would also empower the agency to go beyond appropriate regulatory supervision to involve itself in business decisions that should be reserved for credit unions themselves. We urge the Board to revise the Mission Statement to emphasize its function of ensuring safety and soundness in a manner that facilitates, without directing, credit union operations. We recommend the Board amend the Mission Statement in the following manner:
Our charge is to foster the safety and soundness of federally insured credit unions. We strive to ensure that credit unions are empowered to make necessary business decisions to serve the diverse needs of their members, without unnecessary regulatory impediments. We do this by establishing a regulatory environment that encourages innovation and flexibility, consistent with safety and soundness.
NCUA's Vision Statement Should Focus on Credit Unions
Also on page 8, the Strategic Plan provides NCUA's Vision Statement. It states:
NCUA -- Working with the cooperative credit union system to enable credit union members to thrive in the 21st century and to provide service to all segments of American society, including consumers of modest means.
We think NCUA's vision statement should reflect its appropriate mission of ensuring credit union safety and soundness without needless intervention in credit unions' decisions and activities. We urge the Board to revise the Vision Statement to provide:
NCUA -- Working with the cooperative credit union system to ensure safety and soundness and to enable credit unions to thrive in the 21st century.
The Plan Reflects a Proactive Approach for NCUA Beyond Safety and Soundness
In a number of 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 regulatory, the agency should confine its involvement to facilitating as opposed to engaging in or directing credit union activities.
Examples of inappropriate goals that illustrate this point are:
- NCUA's primary focus has been to ensure that credit unions are safe and sound. NCUA will broaden its focus to more specifically address preparation for the future.
- NCUA, partnering with the credit union community, must broaden its view of safety and soundness to include issues related to credit union development, competitiveness and ability to serve members.
- NCUA must be an active participant in helping credit unions deal with technology integration.
- NCUA will recognize that safety and soundness goes beyond the financials to the ability of credit unions to serve current and attract new members, including the underserved.
- NCUA will provide more proactive on-site advice and guidance to credit unions.
- NCUA should reexamine its regulatory approach and examination process to identify ways to promote entrepreneurial activities of credit unions.
- NCUA should identify creative ways to strengthen credit union management.
- NCUA must develop improved ways, e.g., web pages, to share information regarding best practices and resources with credit unions.
The Plan Seeks to Expand NCUA's Supervisory Authority Inappropriately
The proposed Strategic Plan indicates an expansion of the agency's authority in areas we do not feel is justified. We urge the agency to delete these items from the strategic plan and not to pursue these goals, which are:
- Seek permanent supervisory authority over credit union information technology service providers.
- Increase joint exams with state supervisors as well as random risk reviews of federally insured state chartered credit unions.
One point we would like to expound upon is NCUA's authority over vendors. Permanent authority to examine third party vendors that are not institution-affiliated parties would require a change in the statute, which CUNA opposes. We do not believe NCUA has demonstrated any real need for this authority, even for Y2K purposes (which the current statute permits). We believe NCUA has more than enough to do in correctly allocating its resources internally and properly regulating credit unions, without seeking to obtain additional powers that have not proven to be needed for credit union safety and soundness.
NCUA's Strategic Plan Improperly Directs CUs to Fulfill Social Mission Goals
The Credit Union Membership Access Act recognizes the important role credit unions play in providing services to individuals of modest means and also recognizes that credit unions serve other members as well. The Strategic Plan assumes that the agency should establish social mission goals for credit unions regarding service to low-income individuals -- an assumption we ardently dispute -- and sets forth numerous objectives to achieve those goals. We do not support the plan's proposed approach in this area, as we believe credit union boards should determine what efforts are appropriate and responsible for them in order to serve their members, including individuals of modest means. Examples of directives that promote social mission goals that should be determined by credit unions are:
- NCUA will devote "special support" to all credit unions that serve the underserved. (This is objectionable if it implies an affirmative program on NCUA's part through a new regulation as opposed to a burden-minimization approach).
- NCUA will work with credit unions to provide service to those not being targeted by others. NCUA's regulatory, supervisory and examination policy and its approach in implementing these policies will work in concert to achieve these objectives.
- NCUA will encourage non-community credit unions to expand into low-income communities. (Again, this could be objectionable if it means a new regulation to require such credit unions to enter certain markets.)
- NCUA will increase the total number of low-income credit unions by X percent.
- NCUA will increase potential membership from low-income communities by X percent.
Prompt Corrective Action Should Be A Prominent Factor in NCUA Strategic Plan
We realize that the agency is still in the process of developing its regulations on prompt corrective action. Nonetheless, we share the vision espoused by Board Member Dennis Dollar that PCA can be used as an important regulatory tool to focus the agency's resources toward unhealthy credit unions and minimize involvement with healthy institutions. We believe PCA is a framework that could allow the agency to reduce its budget by focusing on problem areas and providing more flexibility to healthy credit unions, consistent with statutory requirements.
We believe this concept should be an important component of the agency's strategic plan and urge you to amend the plan to incorporate agency objectives regarding the use of PCA. More specifically, we believe those objectives should reflect the overall goal of utilizing PCA as a mechanism to channel agency resources toward real problems and to evaluate whether resources are needlessly directed toward healthy credit unions.
Thank you for the opportunity to provide our views on NCUA's Strategic Plan. We strongly believe the plan is a key document that should present the agency's 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. If you or your staff have any questions about our comments, please do not hesitate to call at 202-218-7769.
Mary Mitchell Dunn
Associate General Counsel
|cc:|| NCUA Board Member Yolanda Wheat
NCUA Board Member Dennis Dollar
NCUA Executive Director Carolyn Jordan
CUNA Governmental Affairs Committee
CUNA Examination and Supervision Subcommittee