Written by Steve Van Beek
Today we'll continue an irregular series on different types of regulatory burden. We've already looked at short-term regulatory burden and used NCUA's sloppy implementation of a new Equal Housing Lender Poster as a prime example.
Regulatory Burden from Guidance. This issue - guidance - is a difficult one as credit unions (and trade associations like NAFCU) regularly ask regulators for guidance on particular issues. And, we usually prefer flexible guidance over stiff and rigid regulations.
That being said, there are numerous issues that develop when regulatory agencies simply pump out more and more guidance without ever taking a holistic view of what they've said in the past and whether it is still accurate and up-to-date.
Guidance Doesn't Go Away. One of the issues with guidance is that it doesn't usually get swept into normal regulatory review processes. For example, it doesn't look like NCUA plans on reviewing their past Letters to Credit Unions or Opinion Letters in their annual regulatory review.
I've mentioned before that NCUA has written 30 legal opinion letters just on 12 CFR 701.33 (compensation for officials). I don't think credit unions would be expecting too much if NCUA were to condense and consolidate their various opinions (and perhaps amend the actual regulation if it is written in such a confusing manner to prompt continuous letters of interpretation).
Examples from Other Regulators. Of course, NCUA isn't the only regulator that has a problem with piles and piles of past guidance stretching back decades. However, it does seem other regulators have started taking steps to help those trying to comply by rescinding outdated guidance. This helps entities as there is less "noise" to wade through when finding and analyzing the regulator's expectations.
Fed Removes Outdated Supervisory Letters. Bravo!! What a small, yet important step especially as the Dodd-Frank regulatory train continues to chug along dropping 400-page proposals and regulations at each stop. On April 12th, the Fed issued a Letter which identified forty-three past Supervisory Letters that were "outdated." Here is from the release:
"Federal Reserve Board staff have identified certain previously issued guidance that should now be inactive. Forty-three SR letters have been determined to be inactive and no longer applicable to the Federal Reserve’s supervision program. In many cases, the information transmitted in these issuances has become outdated or has been superseded by subsequent regulations, policies, and guidance." (emphasis added).
FDIC Financial Institution Letters. The FDIC's main Financial Institutions Letters page has links for both existing letters as well as inactive letters. An easy, simple method to prevent confusion and clarify which letters are still active and up-to-date. Note: NCUA uses this method for IRPS but not for Letters to Credit Unions or Opinion Letters.
OTS and OCC. These are essentially one and the same now due to Dodd-Frank. This also means there is a lot of duplicative guidance that had been issued by the OCC and the OTS. How are they handling this? Very nicely. Check out this example of a 2004 Thrift Bulletin that was duplicative with an OCC Bulletin.
Ok, that is a special situation, right? Well, the OTS was rescinding - and making clear a letter was rescinded - well before Dodd-Frank came along. Here is an example of a 2004 Letter that OTS had rescinded as outdated. And, the OTS threw in an extra bonus by including a link to the Regulatory Bulletin that made the 2004 Letter outdated.
NCUA. As I mentioned earlier, NCUA is in the process of reviewing one-third of their regulations. This provides them with the perfect opportunity to expand their review beyond the regulations and to the numerous guidance documents they have issued over the years. If they did, I'd guess they would find piles of past guidance that is no longer applicable and is causing unnecessary confusion throughout the credit union industry.
Wow - that got a little long and winded. Congratulations if you made it this far - have a great Mother's Day weekend!
If you made it this far - and had forgot about Mother's Day - you're welcome!