Chairman Todd Harper: We've Only Just Begun
Samantha: Hello, this is Samantha Shares.
This episode covers National Credit
Union Administration Chairman Todd
Harperâs 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.
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And now Chairman Harperâs 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 â depending on the
credit union's size, complexity, or
risk of operations â 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 â as a
regulator and as an industry â 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
Harperâs 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.
