One regulator asserts independence from freeze; others silent (so far)

While one federal financial institution regulator has explicitly asserted its independence from the “regulatory freeze” imposed by the Trump administration on all federal agencies, the other financial regulators have not claimed the same freedom — but neither have they withdrawn or filed notices of “postponement” on pending rules.

On the other hand, the regulators haven’t filed any new proposed rules (other than those required by statute) since the freeze was announced.

President Donald Trump, on the evening of his Jan. 20 inauguration, signed an executive memorandum titled “Regulatory Freeze Pending Review,” which requires that new rules that have been sent to the Federal Register but not yet published be immediately withdrawn. Rules that have been published but have not yet taken effect are postponed for 60 days. The memo includes no specific language indicating that financial regulatory agencies (or independent agencies) are not required to abide by the order.

The National Credit Union Administration announced Tuesday that, as an independent federal financial regulator, the freeze does not apply to it. However, going forward with the freeze, the agency also said it would “adhere to its spirit,” according to a statement issued by the agency.

So far, however, the credit union agency is the only one of the five federal financial institution regulators to assert its independent status explicitly.

The others may be doing so implicitly.

Unlike a number of other federal departments and executive agencies, none of the financial regulators have filed with the Federal Register notices of withdrawal for proposed regulations that have either been published or submitted for publication. Likewise, none of the regulators have filed letters of postponement for pending final rules with the federal publication.

The Federal Reserve, on Jan. 24, did publish notice of its final rule on “Total Loss-Absorbing Capacity,” which goes into effect March 27.

The FDIC had at least one proposal out for comment when the freeze was imposed. At its Dec. 13 meeting, the deposit insurance agency issued a proposal for a 60-day comment period on “Recordkeeping Requirements for Qualified Financial Contracts.” The proposal was published in the Dec. 28 Federal Register. To date, the FDIC has not filed for publication in the Register a withdrawal or postponement notice.

On the other hand, the NCUA had issued a final rule on membership requirements for credit unions (“field of membership”) which is slated to take effect Feb. 6. The agency’s board approved the final rule Oct. 27. Further, the credit union agency (at its Jan. 19 meeting) approved an advance notice of proposed rulemaking on “alternative capital” for a 90-day comment period.

However, with its announcement Tuesday, NCUA indicated that the effective date for the membership rule, and the comment period for the capital proposal, would proceed as planned.

“Since May 2016, all regulations approved by the NCUA Board have been required by statute or have provided federally insured credit unions with regulatory relief, such as the final field-of-membership rule, which was approved by the Board last October and becomes effective in February; the proposed field-of-membership rule, also approved by the Board last October (a separate proposal that has not yet been finalized); and the advance notice of proposed rulemaking on alternative capital, approved by the Board last month,” the agency stated. “By moving forward with these rulemakings, NCUA is working to decrease regulatory burdens.”

The credit union regulator is in a slightly different situation from its sister organizations – it’s top regulator, Acting NCUA Board Chairman J. Mark McWatters, was appointed by Trump to his position. The appointment was made late last week when Trump named McWatters, a Republican, to the top job, replacing sitting Chairman Rick Metsger, an Obama-appointed Democrat. Metsger remains on the board as a member; the third seat on the panel is vacant since the retirement last spring of then-Chairman Debbie Matz (D).

The chairman swap likely figured into the NCUA’s decision to assert its independence. As the agency noted in its statement: “The memorandum instructs agencies to send no regulations to the Federal Register for publication ‘until a department or agency head appointed or designated by the President . . . reviews and approves the regulation.’  President Trump has designated J. Mark McWatters as Acting Chairman of the NCUA Board, and all pending NCUA regulations have been approved by unanimous vote of the agency Board,” the agency stated.

However, the credit union agency’s statement also noted that it intends to “adhere” to the spirit of the regulatory postponement. It’s unclear what that means – although, since the “freeze” was imposed, the NCUA ANPR has yet to appear in the Register.