Harper Submits Familiar Legislative Wish List to Senate Committee

Testifying before the Senate Banking Committee Tuesday, NCUA Chairman Todd Harper appeared to be following the old adage, “If you don’t succeed, try, try again.”

In oral and written testimony, Harper recommended most of the same changes in federal law he has requested Congress to make since he became chairman in 2021. So far, Congress has been unwilling, or unable to make those changes.

Sexual Harassment, Other Issues

The hearing featured the other banking regulators and the heads of those agencies faced virtually all of the questioning, on such issues as the Community Reinvestment Act and capital requirements. Many pointed questions dealt with a Wall Street Journal story this week about sexual harassment problems at the FDIC.

“What the hell is going on at the FDIC?” Sen. John Kennedy, R-La., asked FDIC Chairman Martin Gruenberg.

Gruenberg assured senators that the agency has hired an outside law firm to investigate the issue.

“This is not a country for creepy old men,” Kennedy said.

In fact, Harper received only five questions during the140-minute hearing. He was not asked any individual questions—all were posed to regulators who testified.

Brown’s Focus

Banking Chairman Sen. Sherrod Brown, D-Ohio, set the tone—focusing in his opening statement on the failure of Silicon Valley Bank and other banks earlier this year.

“These failures reminded us that bankers’ hubris, greed, and negligence continue to pose grave threats to our financial system, and to American workers and small businesses,” he said.

He added, “The bank failures exposed weaknesses in the supervision of the banking system, disrupted the financial system’s stability, and reminded many Americans that they just don’t trust Wall Street.”

Sen. Mike Rounds, R-S.D., focused on the adoption of recent regulations by the regulators, in particular, the Community Reinvestment Act and new capital requirements for large banks. Those rules do not apply to credit unions.

Rounds said that recent proposals from the banking regulators represent the largest re-write of rules since the adoption of the Dodd-Frank Act.

Responding to one question, Harper assured committee members that credit unions did not face the problems that Silicon Valley Bank and others faced. While those banks had a large percentage of uninsured deposits, Harper said that about 90% of the deposits in credit unions are insured.

In his testimony, Harper said that “the credit union system over the last year has remained largely stable in its performance and relatively resilient against economic disruptions.”

Harper Wish List

And he presented committee members with a legislative wish list, saying that Congress should:

–Reinstate pandemic-related provisions that expanded eligibility for membership in the NCUA’s Central Liquidity Facility.

–Grant the NCUA the power to examine third-party service providers that work for credit unions. “If granted third-party vendor authority, the NCUA would implement a risk-based examination program focusing on services that relate to safety and soundness, cybersecurity, Bank Secrecy Act and Anti-Money Laundering Act compliance, consumer financial protection, and areas posing significant financial risk for the Share Insurance Fund,” he told the committee.

–Amend the Federal Credit Union Act to allow the NCUA to assess Share Insurance Fund premiums even when the equity ratio exceeds 1.30%.

CUNA, NAFCU Priorities

In a joint letter, CUNA and NAFCU outlined their legislative and regulatory priorities, many of which the two groups have pushed in past letters to members of Congress.

In the letter, signed by CUNA President/CEO Jim Nussle and NAFCU President/CEO Dan Berger, the two groups recommend that:

–The NCUA abandon its plan to increase its budget in 2023. “Unfortunately, the NCUA’s budget continues to increase despite industry consolidation, and the 2024-2025 draft budget once again overlooks opportunities to incorporate more efficient processes with potential cost-savings,” the groups contend.

–Congress reject Harper’s proposal to allow the NCUA broader discretion to assess premiums even when the Share Insurance Fund’s equity ratio is above the current statutory level. Berger and Nussle said that while those changes would bring management of the Share Insurance Fund closer to the insurance fund operated by banking regulators, “considering the vast differences between federally insured credit unions and banks, we believe such a comparison to be inappropriate.”

–The NCUA change the field of membership definition of service area to make it easier for credit unions to serve potential members through online services.

–Congress allows all credit unions, regardless of their charter type, to add underserved areas to their fields of membership.

–Increase the member business loan cap, which stands at 12.25%. “With the current inflationary environment, this de minimis threshold is out of date and should be increased to allow credit unions to continue to aid businesses in their communities,” they wrote.

–The NCUA reject Harper’s efforts to expand the agency’s consumer protection exams.

–The NCUA adopt an extended cycle that would require the agency to examine all low-risk, well-run credit unions with under $3 billion in assets every 18 months. This, Nussle and Berger said, would align with changes made by other banking regulators.

–Regulators reject any agency efforts to impose mandatory reporting procedures for credit unions based on climate risk. “The NCUA is not and should not be a climate regulator,” they wrote, adding that agencies should not take any action on climate change issues without congressional approval.

Harper and the other regulators are scheduled to testify before the House Financial Services Committee Wednesday morning.