2014 GAC Wrap-Up

The Creditunions.com team descended on CUNA's GAC this week, taking notes at lectures and breakout sessions for those of you who couldn't attend. Here are a few highlights from five days in credit union wonderland.
Drew Grossman

The Press Panel

CUNA brought together influential voices in political and economic news to talk about the state of the media and offer credit unions tips on how to work with the press. The tips are helpful and worth thinking about when you’re trying to build a presence in your community. The panel included Tucker Carlson, editor-in-chief of The Daily Caller; Ylan Q. Mui, a Washington Post reporter covering The Federal Reserve; and Lauren French, a tax reporter for POLITICO Pro.

Here are some takeaways from the talk:

  • Offer your staff as experts, even if the story isn’t about your credit union. Journalists are always looking for experts, especially local ones, to help explain difficult concepts like the economy, finance, or underserved populations.
  • Before you pitch a story to a journalist, know who the journalist is and what they usually cover; i.e., don’t pitch your philanthropic achievements to the crime reporter.
  • Once a journalist is interested in your story, be as helpful as possible. This might mean making your staff available for interviews or providing additional information to get the story where it needs to be.

Top Exam Issues And Guidance Panel

This session’s panel included Larry Fazio, director, Office of Examination & Insurance for the NCUA; Gail Laster, director, Office of Consumer Protection for the NCUA; and Lance Noggle, assistant general counsel for CUNA. Each offered a different perspective on exams, such as:

  • Larry Fazio identified major issues NCUA expects credit unions to battle in 2014, such as interest rate risk, cyber attacks, money service businesses, private student lending, loan participations, new mortgage rules (specifically ability-to-repay and QM’s), changing CUSO regulations, and liquidity risk. He encourages credit unions and examiners to maintain communication to avoid surprises. He pushed institutions to actively participate in the exam process, stating: You know your institution and members best … we want you to help come up with the solutions.
  • Gail Laster described the Office of Consumer Protection as one based in education rather than enforcement. She listed three criteria that cause her office to conduct on-site exams for credit unions with elevated risk and off-site supervision for moderate risk: HMDA reporting outliers (compared to averages across the industry), violations identified in safety and soundness exams, and complaints. In 2013, the OCP conducted 26 on-site exams and 41 supervisions; in 2014 she anticipates 25 and 50 respectively.
  • Lance Noggle broke down CUNA’s Exam Survey Report for 2013. The survey, he said, gives credit unions a way to rate the NCUA. On a scale of 1-5, from not at all satisifed (1) to very satisfied (5), the survey found overall credit union satisfaction with NCUA’s exam process was a 3.4, the professionalism of the exam team was a 4.1, and the objectivity of the exam was a 3.8.

The Regulatory Tsunami: Is It Over?

This session presented the future of the regulatory climate with insight from Buddy Gill, senior strategic communications and external relations advisor for the NCUA; Zixta Martinez, associate director of external affairs for the CFPB; and Amie Woeber, a representative from the office of Rep. Sean Duffy (R-WI).

As for an answer to the question posed to the panel: is the regulatory tsunami over? Maybe. But that doesn’t mean an end in new regulations. Gill said the NCUA reviews one-third of its rules on a yearly basis and Chairman Matz and the NCUA are constantly listening to credit union issues and problems. Gill described potential new regulations as a way to help credit unions hedge risk, against another economic downturn. Credit unions didn’t cause the recession, but they were affected by it, he said.

Martinez described the role of the Credit Union Advisory Council as an on the ground perspective for the CFPB. The Advisory Council is made up of credit union employees from institutions with fewer than $10 billion in assets and provides information, analysis, and recommendations to the bureau This fills the information gap for the bureau, which only has legal authority over institutions $10 billion and larger.

Woeber discussed her boss Rep. Duffy’s 7th Congressional District, which is home to more than 280,000 credit union members, and described as large and rural; a place where the cost of red tape may not be absorbed. Woeber said Rep. Duffy is opposed to what she described as little congressional oversight on the tsunami of regulations that [the CFBP] are releasing. Rep. Duffy does, however, believe congress should be involved in consumer protection and recently sponsored H.R. 3193, a bill to amend the Consumer Financial Protection Act of 2010 to strengthen the review authority and exclude the director of the bureau from voting on measures. The bill is up for vote in the House on Thursday.

What’s Next For Capital Reform?

This session featured two speakers, Bill Hampel, CUNA chief economist, and Kirk Kordeleski, CEO of $5.4 billion Bethpage Federal Credit Union in New York. Hampel spoke about the NCUA’s new risk-based capital rule proposal and how it would affect credit unions. He said its implementation is similar to Basel III and many of the risk weightings are similar to those that currently exist for risk-based net worth. According to Hampel the biggest impediment for credit unions will be the new 10.5% hurdle credit unions will have to achieve to be considered well-capitalized. Kirk followed with an update on secondary capital, calling it a tool that is essential for credit unions especially in the light of the new regulation surrounding risk-based capital. A bill introduced in the House of Representatives in February 2013 that gives credit unions access to secondary capital has been referred to the House Committee on Financial Services. It currently has 47 co-sponsors, and Kirk encouraged credit unions to get in touch with their representatives to inform them of the importance of the bill.

Latest Developments In Payments

Shonda Clay of the Federal Reserve Banks and John MacAllister, principal of Dorado Industries, presented on the future of payments. Clay laid out the plans for a Federal Reserve white paper addressing payments to be released in the second half of 2014. MacAllister shared a few inconvenient truths about the future of payments. Grab a scotch to numb the pain and check out the takeaways:

  • With new payments technology, interchange income is going away. Financial institutions need to put some thought into what will replace it.
  • Tech is making relationships between retailers and consumers more dynamic. Instead of interaction only at point of sale, merchants are communicating with your members the second they hit the parking lot. And they might not be incentivizing using your credit union’s debit or credit card.
  • A global e-commerce standard is coming within the next three years. Although it won’t be Bitcoin, a similar payment technology will make global transactions easier and quicker.
February 27, 2014

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