Credit Union Regulatory Guidance Including: NCUA, CFPB, FDIC, OCC, FFIEC

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- Topic: NCUA Chairman Todd Harper's vision for the future of credit unions
- Occasion: 90th anniversary of the Federal Credit Union Act
- Key principles for credit union success over next 90 years:

1. Transparency
   - Public disclosure of executive compensation (proposed rule)
   - Reporting of overdraft/NSF fees for large credit unions
   - Advocating for third-party vendor authority

2. Fairness 
   - Focus on serving underserved populations
   - Advancing diversity, equity, inclusion, and accessibility
   - New rule on quality control for automated valuation models

3. Vigilance
   - Active management of risks, especially cybersecurity
   - Proposed rule on incentive-based compensation for large credit unions

4. Foresight
   - Addressing credit union consolidation trend
   - Proposed rule requiring succession planning

- Emphasis on long-term stewardship and positive impact
- Call for continued innovation and focus on member needs

The podcast notes avoid reproducing any copyrighted song lyrics or extensive quotes from the article.

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What is Credit Union Regulatory Guidance Including: NCUA, CFPB, FDIC, OCC, FFIEC?

This podcast provides you the ability to listen to new regulatory guidance issued by the National Credit Union Administration, and occasionally the F D I C, the O C C, the F F I E C, or the C F P B. We will focus on new and material agency guidance, and historically important and still active guidance from past years that NCUA cites in examinations or conversations. This podcast is educational only and is not legal advice. We are sponsored by Credit Union Exam Solutions Incorporated. We also have another podcast called With Flying Colors where we provide tips for achieving success with the N C U A examination process and discuss hot topics that impact your credit union.

Samantha: Hello, this is Samantha Shares.

This episode covers National Credit
Union Administration Chairman Todd

Harper’s opinion article in C U Times

The following is an audio version of
that advisory and the press release.

This podcast is educational
and is not legal advice.

We are sponsored by Credit Union
Exam Solutions Incorporated, whose

team has over two hundred and
Forty years of National Credit

Union Administration experience.

We assist our clients with N C
U A so they save time and money.

If you are worried about a recent,
upcoming or in process N C U A

examination, reach out to learn how they
can assist at Mark Treichel DOT COM.

Also check out our other podcast called
With Flying Colors where we provide tips

on how to achieve success with N C U A.

And now Chairman Harper’s letter

Ninety years ago, President Franklin
Delano Roosevelt signed the Federal

Credit Union Act, establishing the
federal system of credit unions and

increasing access to affordable financial
products and services for more Americans.

Since then, the system has evolved
considerably from one in which credit

unions offered basic savings accounts,
appliance loans, and short-term credit

to one that provides long-term share
certificates, money market accounts, auto

loans, mortgages, credit cards, commercial
lending, and private student loans.

So, as we look ahead to the next
90 years and what the credit union

system can become, we should mind the
lessons of the immortal lyrics of the

Carpenters, "We've only just begun."

Today's credit union system is thriving,
and we at the NCUA need to make it

even stronger and more resilient.

With the financial services marketplace
ever evolving, the system must continue

to innovate and focus on the needs of its
members, especially those of modest means.

Credit unions also need to
embrace transparency, fairness,

vigilance, and foresight to remain
successful in the years ahead.

Transparency

Transparency is the sunshine that better
protects credit union members and the

system, feeds efficiency, saves time,
and leads to better decision-making.

When credit unions and their members
have good data and information, they

can make better decisions, benchmark,
and set themselves up for success.

In the spirit of transparency, the
NCUA is developing a proposed rule

that would require federal credit
unions to publicly disclose information

about executive compensation.

All federal credit union member-owners
deserve to know what their credit

union leadership is paid, just
like what state-chartered credit

unions provide to their members and
public companies disclose to their

shareholders about executive pay.

In addition, the NCUA's recent requirement
that credit unions with more than $1

billion in assets report income from
overdraft and non-sufficient funds

fees on their Call Reports provides
transparency into how credit unions

operate and compare with their peers.

Transparency is also why the NCUA
advocates for the restoration of

its third-party vendor authority.

When the NCUA has greater visibility
into the operations of credit union

service organizations and third-party
vendors, we can better protect credit

union members and the system and
save credit unions time and money.

We can also close a regulatory blind
spot that threatens the nation's

vital infrastructure, enabling
the agency to find and address

regulatory and operational harm
before systemic threats evolve.

After all, the best way to solve
a problem is to keep it from

happening in the first place.

Fairness

Credit unions were created to
provide financial services to

underserved populations left behind
by mainstream financial institutions.

If credit unions are to continue to
follow this statutory mission, fairness

must be their guiding principle.

That's why the NCUA joined other federal
financial regulators in issuing a final

rule on quality control standards for
automated valuation models used by

mortgage originators and secondary
market issuers when valuing homes.

That final rule mandates that these
tools incorporate fair lending

principles and adhere to quality
control standards designed to

comply with nondiscrimination laws.

Fairness is also why credit unions must
continue to advance diversity, equity,

inclusion, and accessibility, so all
members have access to safe, fair,

and affordable financial services.

This isn't a political proposition;
it's a business imperative.

Diversity works.

It improves organizational performance,
results in better products, and

strengthens the bottom line.

With their roots in providing affordable
financial services to under-resourced

communities, credit unions must
stay focused on serving everyone

regardless of race, ethnicity, gender
identity, orientation, or religion.

With greater perspectives in the
workplace and in product offerings,

credit unions can better fulfill
their statutory mission, contribute

to expanding the middle class,
strengthen our democracy, and create

a financial system that works for all.

Vigilance

In today's complex and quickly changing
economy, credit union executives,

leaders, and boards must exercise
active, not passive, management.

Considering the economic, financial,
and technological challenges on the

horizon, credit unions must remain
vigilant in managing all risks.

Cybersecurity risk, for
example, is increasing.

Last November's FedComp outage and
the widely reported ransomware attacks

on various credit unions this year
are reminders of what's at stake.

Members have lost access to funds;
faced bounced payment, late-payment,

and overdraft fees; and had their
credit scores negatively affected.

Cyberattacks are a matter of when, not
if, and credit unions must be prepared.

Vigilance also means the responsible
stewardship of financial institutions.

The failures of Cal State 9 Credit Union
and Western Corporate Federal Credit

Union demonstrate the unsustainable
costs of incentivizing short-term gain.

To address this problem, the NCUA
Board approved a proposed joint agency

rule on incentive-based compensation
that will align executive incentives

with the long-term stability of the
financial institutions they manage.

This proposal, required by statute,
will help billion-dollar-plus

credit unions avoid a repeat of
the financial crisis 15 years ago.

Foresight

Finally, foresight is needed to address
the longstanding consolidation trend

that challenges the credit union system.

A credit union board's failure
to plan for the transition of its

management and key decision-makers
comes with high costs, including

the potential for an unanticipated
merger when key personnel depart,

especially in smaller credit unions.

To address this concern, the NCUA
Board recently reproposed a rule that

would require all federally insured
credit unions to have a tailored

succession plan — depending on the
credit union's size, complexity, or

risk of operations — that covers the
board of directors, the supervisory

committee, and other officials.

Like cyberattacks, a change in
leadership is a matter of when, not

if, so credit unions must be prepared.

Keys to Success

Transparency.

Fairness.

Vigilance.

Foresight.

These are the keys for the next 90
years of credit union success, and

these north stars align with the
seven-generation stewardship principle.

This widely used management concept,
which traces back to the Iroquois Nation,

holds that leaders should look ahead
seven generations to determine the impact

of their choices on their descendants.

If a choice will lead to positive
outcomes and promotes overall

well-being over that long term,
then it's an action worth pursuing.

And, by doing just that — as a
regulator and as an industry — we'll be

following the advice given to us by the
Carpenters, "So many roads to choose.

We'll start out walkin' and learn to run.

And yes, we've [only] just begun."

This concludes the Chairman
Harper’s opinion letter.

If your Credit union could use assistance
with your exam, reach out to Mark Treichel

on LinkedIn, or at mark Treichel dot com.

This is Samantha Shares and
we Thank you for listening.