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CUNA to Senate Ease smothering effect of some CU regulations
WASHINGTON (7/9/09)--Credit Union National Association (CUNA) Small CU Committee member and Allied CU President/CEO Frank Michael during a Wednesday Senate subcommittee hearing urged legislators to ease the “smothering effect” of increased regulatory scrutiny that is causing an increasing number of small rural credit unions to merge with their larger counterparts.
Click to view larger imageCUNA Small CU Committee member and Allied Credit Union President/CEO Frank Michael urged legislators to ease a regulatory burden that is pushing an increasing number of small rural credit unions to merge with their larger counterparts. He said Congress should find opportunities to provide exemptions from the most costly and time-consuming burdens to cooperatives and other small institutions as lawmakers move forward on financial regulatory reforms. (CUNA Photo)
Speaking before a Senate subcommittee on financial institutions hearing on the effects of the economic crisis on rural community banks and credit unions, Michael asked the assembled legislators to “look for opportunities to provide exemptions from the most costly and time-consuming initiatives to cooperatives and other small institutions” as they move forward with their work on financial regulatory reforms. Addressing the Obama administration’s recently released plans to create a Consumer Financial Protection Agency (CFPA), Michael said that while he agrees that consumers should be protected, adding an additional level of regulatory oversight would, in the case of his credit union, lead to a costly and burdensome regime of dual examinations. The administration has proposed consolidating the consumer protection roles currently held by the Federal Reserve, National Credit Union Administration and other federal financial regulatory agencies into the CFPA. National Credit Union Association (NCUA) Chair Michael E. Fryzel in late June said that the NCUA will propose the creation of a Consumer Protection Office in its 2010 Agency Budget. According to Fryzel, the new office would “consolidate existing consumer protection functions already administered by NCUA and would create a liaison relationship with relevant external parties, such as the Consumer Financial Protection Agency (CFPA), if that proposed entity becomes a reality." However, the Wall Street Journal on Wednesday reported that U.S. Treasury Assistant Secretary Michael Barr confirmed that the NCUA would lose its consumer protection powers under the administration’s proposed CFPA legislation. In House testimony, Barr said that credit unions would not be exempted from the new consumer protection regulations. Rather, all financial institutions would receive the same treatment under the CFPA, regardless of their composition or charter. Another pressing issue raised during the hearing was the impact that the current cap on member business lending (MBL) is having on both credit unions in general and, more specifically, on smaller rural credit unions. Michael said that while CUNA supports “strong regulatory oversight of how credit unions make member business loans, there is no safety and soundness rationale” for current laws that restrict the amount that credit unions may lend to their member businesses to 12.25% of the credit union’s total assets. Michael advocated that Congress grant the NCUA the authority to lift the current MBL cap above 20% of a given credit union’s assets “if safety and soundness considerations are met.” Such a move would “safely and soundly” result in $10 billion in new small business loans within one year, Michael added.
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