Week ahead: Provocative proposals from credit union regulator close comments, Powell meets press

Comments on two controversial proposals by the federal regulator of credit unions are due, and the chair of the Federal Reserve meets the press about interest rates and (likely) other issues regarding the Fed – including its independence in the face of presidential criticism – in the week ahead.

Comments are due on Friday (July 26) and Monday to the National Credit Union Administration (NCUA) on two proposals from the agency that have been embraced by the credit unions the agency regulates – and scorned by banks and others that compete with them.

On Friday, the agency closes the 30-day comment period on its proposal to delay a regulation on risk-based capital for complex credit unions. The effective date of the regulation, first adopted in 2016, has already been delayed twice by the agency.

At its June meeting, the NCUA Board proposed another delay – this one for two years – saying it would use the extra time (to Jan. 1, 2022) prior to implementation to review potential changes such as subordinated debt authority (a way to allow credit unions to generate “alternative” or “supplemental” capital); capital requirements for asset securitization; and an option similar to the community bank leverage ratio (CBLR) proposed by federal banking agencies under last year’s regulatory relief statute (the Economic Growth, Regulatory Relief, and Consumer Protection Act, or EGRRCPA/S.2155).

The proposal was controversial from the outset: It was approved for comment by the board on a vote of 2-1, with Republicans Chairman Rodney Hood and Board Member Mark McWatters voting in favor, and Democratic Board Member Todd Harper voting against.

Adding to the controversy: Credit unions and their trade groups mostly welcomed the proposal – while banks and their advocates panned it.

While the comment deadline for the proposal is officially Friday (comments must be received by midnight), most comments will likely be filed during the day and posted by NCUA on its website on Monday. (As of midday Friday, only seven comment letters were posted on the agency website.)

On Monday, NCUA closes a 60-day comment period on a proposal to give credit unions more leeway in accepting deposits from nonmembers. Under the proposal, the basis for measuring the regulatory limit on nonmember and public unit shares that federally insured credit unions (FICUs) may hold would change – in many cases increasing the dollar amount that could be held. In proposing the rule in May, the agency estimated an increase of 6%, or about $135 billion, in credit union system funding capacity generated under the proposal.

As with the proposed delay of the risk-based capital rule, credit unions and their advocates largely praised the proposal – banks and their trade groups gave it a collective thumbs down. However: No comments about the proposal had been posted by the agency on its website by midday Friday.

Also head for next week:

  • Wednesday (July 31): Federal Reserve Board Chair Powell holds a press conference following the Federal Open Market Committee’s (FOMC) latest meeting on interest rates, mostly to discuss the committee’s decisions – but likely also to respond to reporters’ questions about the latest criticisms from President Donald Trump of Powell’s leadership of the central bank’s board, as well as questions about the economy generally. (On Friday, the Commerce Department reported that gross domestic product [GDP] rose at an annual rate of 2.1% in the second quarter of the year – well below the 3.1% the department reported for the first quarter.)
  • Tuesday (July 30): The Senate Banking Committee holds a hearing on “regulatory frameworks for digital currencies and blockchain” – although no regulators are scheduled to offer testimony.
  • Also Tuesday: The Community Bank Advisory Council of the Federal Deposit Insurance Corp. (FDIC) meets in a day-long session to discuss supervision modernization and de novo banks, among other things.

(See the Reg Report Calendar for more details on times, venues)