Credit union regulator catches up by formally signing on to proposal clarifying, codifying role of supervisory guidance

A proposed rule aimed at clarifying and codifying the role of supervisory guidance from federal financial institution regulators was adopted by the credit union regulator on Wednesday, as that agency joined federal banking agencies in issuing the proposal for comment.

Voting unanimously during a rare second meeting in a month, the National Credit Union Administration (NCUA) Board joined the banking agencies in issuing (for a 60-day comment period) the proposal on the role of supervisory guidance issued by the agencies. Under the proposed rule, the meaning of “supervisory guidance” would be clarified as meaning, essentially, it doesn’t have the force of law.

The proposal, if finalized, would codify an interagency statement issued by all of the agencies in September 2018. That statement was intended to make clear that, unlike a statute or regulation, supervisory guidance does not have the force and effect of law. “Supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance,” the 2018 statement read.

A petition brought by banking industry trade groups in 2018 called on the federal banking agencies and the Consumer Financial Protection Bureau (CFPB) to go further than a statement in clarifying the role of supervisory guidance, specifically urging the agencies to make clear that matters requiring attention, matters requiring immediate attention, and other such supervisory actions may only be based on a violation of statute or regulation and not on a failure to comply with supervisory guidance.

The NCUA was not a target of the 2018 petition aimed at the banking regulators, which began considering how to address the bank groups’ concerns. However, because the NCUA joined in the 2018 statement (and as required by federal regulatory procedure), the NCUA had to be involved in the considerations for a proposed rule, according to agency staff.

The Federal Deposit Insurance Corp. (FDIC) Board issued the proposal for comment last week at a meeting of its board. The CFPB and the Office of the Comptroller of the Currency (OCC) followed that action and joined the proposal (both of those agencies’ leaders also sit on the FDIC Board). The Federal Reserve also jumped on the proposal after its board gave the green light.

That left the NCUA as the only agency (as of Wednesday) that had signed the 2018 statement but whose leadership had not yet agreed to join the proposed rule. But it was not for a lack of effort.

On Oct. 8, the NCUA publicly released its agenda for a board meeting the following week, which included an item about a proposal regarding the role of supervisory guidance and communications.

However, when the board’s meeting began a week later (Oct. 15), Chairman Rodney Hood opened it by saying the supervisory guidance proposal had been removed from the agenda; he gave no reason for the change.

At Wednesday’s meeting, Scott Neat, associate director of the agency’s Office of Examination and Insurance, gave a brief explanation why: “Because we had not yet received confirmation from every agency that ‘pens were down’ (on changes to the proposal) prior to publicizing our agenda on Oct. 8, we had to remove (the proposal) from the board agenda” for Oct. 15.

Since then, all of the banking agencies have signed on to the proposal.

As Neat also noted, the agencies strive to work closely together on joint rulemaking and to issue their proposals at the same time – but it doesn’t always work out that way. “Timing is seldom simultaneous,” Neat said.

However, he also told the board, to ensure that the NCUA can “remain timely in its formal approval process of this proposed rule,” the agency convened the board meeting Wednesday to consider it. Typically, the NCUA Board meets only once a month.

In other comments, staff told the NCUA Board members that the proposal will not create a burden for credit unions. That’s at least partially because, they said, the agency has followed the intent of proposal for at least the last seven years.

Staff pointed out that the NCUA has, at least since 2013, tied all “documents of resolution” for credit unions to specific statutory and regulatory citations – a practice, the agency staff (and board members) vowed would not change under the proposed rule.

Proposed Interagency Rule, Part 791, Role of Supervisory Guidance

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