WASHINGTON (6/28/13)--Noting that regulators need to be watchful "in good times and bad," National Credit Union Administration board nominee Richard Metsger Thursday said credit union rules need to be modernized to address the threats presented by today's financial marketplace.
Richard Metsger, right, purchased his first car, a 1957 Chevy, with the help of a $350 loan from Portland Teachers CU, and later went on to serve on that credit union's board of directors. Here, the former Oregon state senator and current NCUA board nominee is sworn in before a Senate Banking Committee nomination hearing. (CUNA Photo)
The NCUA nominee was responding to a question asked by Senate Banking Committee Chairman Tim Johnson (D-S.D.) during a nomination hearing. Johnson asked about the lessons credit unions have learned from the financial crisis, and what additional steps the agency should take to strengthen the credit union system.
Metsger said that interest rate risk, emergency liquidity access and tech-related concerns are the top level risks on the horizon that the agency should examine.
On interest rate risk, Metsger noted that credit unions are very involved in the mortgage marketplace. "We all know what happens in low interest rate environments...It's going to change eventually, we don't know when, or where, or how much...So credit unions need to be prepared," he said. As the regulator, NCUA should work to ensure credit unions are prepared for and manage that risk, he added.
Metsger also said ensuring that all credit unions have some sort of plan to access liquidity in emergency situations is vital.
Addressing technological risks will be another priority if he is confirmed, Metsger said. No matter how well credit unions are run, "the technology that has helped our lives so much has also created tremendous risk...systemic risk...to the share insurance fund." Credit unions can in a matter of milliseconds possibly have tens of millions of dollars taken away, he noted. "I will work diligently, if I am confirmed, to see that the rules and regulations of the NCUA are as contemporaneous as possible to meet the technological risks, particularly in the area of cybersecurity," Metsger said.
"If confirmed, my vision is for NCUA to be recognized as an agency that manages its own fiscal house well, proposes regulatory action that is effectively targeted to achieve the desired outcome without placing unnecessary burden on the credit unions themselves and, above all, maintains the confidence and trust the American public places in their local credit union," he said in a prepared statement.
"Updating, simplifying, eliminating and clarifying existing rules to ensure that they are effective, but not excessive, consistent with safety and soundness," will be another focus if he is confirmed to serve the agency, the nominee said. Credit union safety and soundness is "job one" of the regulator, and "must not be compromised," Metsger added.
"I firmly believe a regulatory agency should strive to be its own best critic," he said, referencing NCUA's review of one-third of its rules and regulations each year. "I can assure you that, if confirmed, this will not be merely a mechanical exercise for me. I will approach this rolling review with diligence."
Legislation that would increase the credit union member business lending cap was also briefly discussed during the hearing. Sen. Jack Reed (D-R.I.), a co-sponsor of the Small Business Lending Enhancement Act (S. 968), asked Metsger if increasing the MBL cap from 12.25% to 27.5%, as proposed in the bill, is a good idea. "I think it's a good idea to recognize that it is the purview of Congress to make decisions," Metsger said.
If confirmed, Metsger would fill the vacant NCUA board seat created when former member Gigi Hyland exited last year, served as Oregon state senator from 1999 to 2011, where he chaired the Oregon Senate committee that heard all financial institution legislation. He was a member of the board of directors at Portland Teachers CU from 1993 to 2001 and has also been a board member of Financial Beginnings, a nonprofit focused on increasing students' financial literacy.
Other nominations discussed include: Rep. Melvin L. Watt (D-N.C.) to be director of the Federal Housing Finance Agency; Dr. Jason Furman, of New York, to be a member and chairman of the Council of Economic Advisers; Kara M. Stein of Maryland, to be a member of the Securities and Exchange Commission; and Dr. Michael S. Piwowar of Virginia, to be a member of the Securities and Exchange Commission.
The committee must vote on these nominations. If approved by the committee, the nominees will also need to be confirmed by a full U.S. Senate vote.