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CUNA RegFlex plan needs big changes
WASHINGTON (5/25/10)--The Credit Union National Association (CUNA) has urged the National Credit Union Administration (NCUA) to revise or to simply not adopt the recently proposed changes to its RegFlex program. The NCUA proposal, which was announced in March, would eliminate RegFlex authority for credit unions in regard to the 5% limit on fixed asset investments, the requirement for the personal guarantees of borrowers for member business loans (MBLs), stress testing of certain investments, and discretionary control of investments. While CUNA agreed that all NCUA programs “should be monitored and reviewed periodically to ensure they are meeting their objectives,” CUNA strongly supports the RegFlex program and has urged the agency not to undermine it with this proposal. CUNA in a comment letter said that if the agency is convinced changes in the RegFlex program are called for, it should address them in a “more targeted” manner that would not jeopardize the overall program. Specifically, CUNA senior vice president and deputy general counsel Mary Dunn recommended that NCUA consider whether the provisions regarding revocation of RegFlex authority for specific exemptions should be strengthened as opposed to eliminating RegFlex authority for all federal credit unions in key areas. Such steps could include setting aside more capital by credit unions that are experiencing material problems or “instituting increased safety and soundness procedures at the credit union,” when there are significant safety and soundness issues, CUNA added. CUNA also addressed a number of specific concerns regarding RegFlex authority with respect to MBLs and fixed assets. On MBLs, CUNA said rather than forcing RegFlex credit unions to require personal guarantees from borrowers that receive credit union MBLs, the NCUA should “address MBL concerns on an individual credit union basis." The letter also notes that "NCUA has authority now to direct any RegFlex credit union that is experiencing unacceptably high levels of defaults with MBLs to forfeit its RegFlex eligibility as it relates to MBLs” until the credit union “can demonstrate it is able to manage the risks." In addition, CUNA noted that MBL lending should be facilitated for well-managed credit unions in order to assist small business, communities and the economic recovery. Proposed changes that would impose a 5% fixed asset investment limit on currently exempt RegFlex credit unions “could negatively impact credit unions' planned branching activities” and be “very problematic for RegFlex credit unions that are about to begin, or have already begun, the construction phase of branch expansion,” CUNA added. CUNA further recommended that regarding investment authority delegation under the RegFlex program, NCUA consider a lower level of delegation authority rather than eliminating it altogether. The NCUA should also request further credit union comment on potential changes to rules governing the delegation of investment authority before taking any action, CUNA said. CUNA also noted that while federal credit union officials generally backed “some stress testing of the securities that a credit union is holding,” they did not agree that the NCUA “should totally eliminate flexibility for well- managed credit unions regarding such testing.” The letter also notes that CUNA is reviewing credit unions regulatory burdens and will be accumulating information and sharing it with policymakers in the coming months. For the full CUNA comment letter, use the resource link.


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