The National Credit Union Administration board on Tuesday approved a final rule on supervisory guidance.
The proposal was issued in early November and the rule was approved unanimously by notation vote, the third time in a month the agency has approved rules that way. In December, a unanimous notation vote was used to ease restrictions on exemptions for filing suspicious activity reports, and earlier this month the regulator took similar steps with a request for information intended to improve transparency at the agency.
The supervisory guidance proposal was issued as joint rulemaking among NCUA, the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, Consumer Financial Protection Bureau and other federal regulators. The rule codifies a 2018 Interagency Statement Clarifying the Role of Supervisory Guidance and reaffirms that the credit union regulator “will continue to follow and respect the limits of administrative law in carrying out [its] supervisory responsibilities,” according to a press release.
That statement, NCUA said, reiterates that unlike law or regulation, supervisory guidance “does not have the force and effect of law” and “does not create binding legal obligations.”
But credit unions and industry groups that commented on the proposal had concerns with the plan and how it might function upon implementation.
Sonya McDonald, chief operating officer at $12.5 billion-asset Randolph-Brooks Federal Credit Union in Live Oak, Texas, wrote that the pandemic “has shown the malleability of guidance, as we have seen differing opinions in the best way to handle the fallout.” With change occurring faster than ever, she added, more clarity around the difference between regulation and supervisory guidance could help provide more stability for the industry.
However, some suggested NCUA refine how it approaches the matter, including removal of the word “supervisory.” Doing so, suggested Ronald McLean, president and CEO of the Cooperative Credit Union Association, could “help underscore that the guidance has no enforcement implications.”
He added that “each guidance statement should include a prominent notice in the same size type as the entire document highlighting that the information provided is strictly guidance and cannot be enforced by examiners.”
CCUA also suggested the proposal isn’t clear enough regarding what sorts of agency communications fall under the rubric of supervisory guidance – and that problem is compounded when the message comes from examiners or the NCUA board.
“While the proposal is a good step in the right direction, more clarity is needed relative to what communications are included and which ones are not,” wrote McLean. “For example, is the NCUA’s annual letter to credit unions detailing supervisory and examination priorities merely guidance? To what extent are credit unions allowed to set or supplement supervisory [and] safety and soundness priorities provided that they are reasonable and tailored to the credit union’s risk profile? How does NCUA categorize communications such as its annual letter on supervisory priorities?”
The National Association of State Credit Union Supervisors also called on NCUA to ensure that it works with state regulators to incorporate state-level guidance into joint examinations.
While NCUA approved the rule on Tuesday, it will not take effect until 30 days after its publication in the Federal Register.
