Speech on Reg Burden; Reg D Comments; Share Insurance Webcast

Written by Steve Van Beek

Last Friday, Federal Reserve Board Governor Elizabeth Duke gave a speech to community bank presidents and indicated that regulators need to resist the urge to regulate using "one-size fits all" regulation and supervision.  

"I do believe in the community bank model and its future. Indeed, I believe there is a real place for the customization and flexibility that community banks can exercise to meet the needs of local communities and small business customers. Still, the disproportionate cost of regulatory compliance for smaller institutions is real. Financial supervisors must be vigilant in efforts to maintain financial system stability and ensure that consumers are able to understand their financial product choices, no matter where they choose to bank. However, as we and other agencies craft regulations to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and adjust supervisory practices to meet these priorities, I think we must avoid a one-size-fits-all approach to supervision."

While the speech was directed at community banks, there are clear parallels for credit unions who are facing increased regulatory compliance costs.  I continue to find it interesting that regulators talk about reducing regulatory burden when there is a 2,300 page elephant in the room mandating thousands of regulatory changes.  Every tweak and adjustment that stems from Dodd-Frank increases the regulatory burden.  For compliance officers, even the process of determining if a regulation applies to their credit union is a challenge with the current pace of regulatory change.

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In mid-December, NAFCU sent a comment letter to the Federal Reserve on Regulation D.  NAFCU emphasized the need to update the arcane transactional limitation requirements to reflect the modern environment.  Here is one paragraph from the letter:

"The current law is burdensome and confusing for depositors that wish to have unfettered access to their funds. It is unreasonable to expect consumers to understand and remember the arcane limits on the number and type of transfers that are allowed out of their savings account.  For example, under the current rule, transfers among the consumer’s accounts via online banking are limited; however, a consumer can make unlimited transfers via mail or by messenger. The rule is outdated and as a consequence, the restrictions on transfers are incoherent to even the most knowledgeable consumers. It would be helpful to consumers if the regulation was modified to reflect the current financial services environment."  

Updating the Regulation D transaction limitation requirements is a win-win as consumers obtain greater access to their funds and credit unions would need to spend less time and resources classifying and monitoring transactions.

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On January 25th, NAFCU will host a special 2-hour webcast on Share Insurance featuring yours truly.  The early-bird pricing ends at the end of day tomorrow - so you can save $100 by signing up today or tomorrow.  

We are going to be covering Share Insurance issues from a couple of different angles: 

• How Share Insurance is Calculated Per Account - Based on Ownership Type;
• Disclosure of Federally-Insured Status on Advertisements;
• Share Insurance Disclosure Requirements Where Credit Unions Take Deposits;
• How Mergers Impact Share Insurance Coverage;
• Options for Educating Members on their Share Insurance Coverage;
• NCUA's Share Insurance Calculator; and 
• Detailed Examples of Certain Accounts and the Amount of Insurance Coverage Available.

The full information is here.  Also, because this is a 2-hour webcast, NCCOs can earn 2 CEU credits.

Questions & Answers.  As usual, we'll be answering questions during the webcast.  Due to complex nature of share insurance questions - we'll also be posting a detailed Q&A document that will be available to attendees after the webcast.  If you are registered and have questions ahead of the webcast - please send them in ([email protected]) and I'll try to add the issue into the presentation.  At a minimum, we'll include the question in our Q&A document. 

Comments

[David]

I second the motion; however, our reasons for requesting a regulatory change must make economic sense, not business sense. This is because the transaction limitations have to do with how the Fed measures liquidity in the money supply in order to make monetary policy. Simply erasing the limits poses a problem to Fed economists because it obfuscates the liquidity of savings deposits. At issue for financial institutions, and for the Fed, is that even with the transaction limitations, there are ways around them. This means that the Fed can't actually properly determine the liquidity of savings deposits. If our regulatory advocacy conversations revolve around this point, we will be more likely to effect a change in the reg.

[Steve Van Beek]

David,
Great points - thanks for the comments. One of the points I'll raise in tomorrow's blog post is how the Fed could exclude certain transactions from being "Reg D transactions."

The Fed already excludes transfers made to repay a loan at the same financial institution. If a transfer from savings to cover an overdraft from checking received the same treatment, there would be less confusion regarding Reg D.

Thanks again for the comments.