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NCUA chairman talks business lending, membership rules

President Barack Obama in Maynamed Rick Metsgerchairman of the National Credit Union Administration's board, succeeding DebbieMatz. Metsger was elected vice chairman in September 2014 after he joined the boardin August 2013. He and Mark McWatters remain the only members of the board, anda replacement for Matz' seat seems unlikely until after the November elections.

In his brief stint aschairman, Metsger has already seen the Independent Community Bankers of Americafile suit against theNCUA over its member business lending rule, which eliminated many thresholds oncommercial lending in favor of "principle-based" regulation. Somesuspect the ICBA might also filesuit regarding the agency's potential changes to its field ofmembership requirements.

In an interview with S&PGlobal Market Intelligence at the NASCUS Summit, Metsger spoke about thoseissues and the challenges of a two-person board.

The following is an editedtranscript of that conversation. This is the first in a two-partseries.


Rick Metsger
Chairman, NCUA
Source: NCUA

S&P Global MarketIntelligence: I realize you can't speak about the ICBA lawsuit, but are yousurprised the banks have reacted as strongly as they have to the ?

Rick Metsger: No. Before we even issued arule they said they were going to take whatever steps necessary to stop it.That was before they even saw what it was. So this was a predetermined outcome,and I'm not surprised at all. This has long been a battleground for banks. Manypeople in that industry just think that credit unions shouldn't be competing withthem. That someone would criticize a rule before they even saw it tells youthat it's an ideological position of theirs that has nothing to do with thefacts.

Some have suggested thatcommercial lending is just one more thing that credit unions were notoriginally designed to do, and that it's another step in them becoming more andmore bank-like. How do you react to that?

That'sjust untrue on its face. The very first credit union ever formed was formed forthe purpose of funding neighborhood businesses. Credit unions have been makingmember business loans since they were created in the '30s. In fact, even in theCredit Union Membership Act it specifically states that many credit unions werecreated for the purpose of small-business lending. So it has been a part oftheir DNA since the beginning of the credit union movement.

The banking advocates willalso say that if credit unions are going to act like banks they should be taxedlike banks. Are you at all concerned that the tax-exempt status could be injeopardy?

No,that's another perennial issue that's been going on for decades. My response tothat is the same as it always has been. That is that if the credit unioncharter was so competitively advantageous you would see all the banks changingto credit union charters. And they don't do that. They've prepared theirfor-profit status, which is fine. And the not-for-profit cooperative choice forconsumers is equally important.

The field of membership ruleis another that has caused some grumbling from the bank side. Why do you feelthat making it easier for federally chartered credit unions to bring on newmembers is critical at this point?

Thefocus is always on consumers and their choice. Part of the Federal Credit UnionMembership Access Act gives a lot of deference to the agency to make sure thatour regulations conform to the times. We have constraints but we also have alot of flexibility. The consumer has changed so much since the Act was passedin 1998. For example, there was no such thing as a smartphone. People didn't domobile banking, and they didn't apply for mortgages online. Their communitiesand how they interact with people now is so different. A lot of things are justbeing redefined. It's our responsibility as a board to make sure that consumershave access to a not-for-profit alternative. So we need to make sure that ourregulations are contemporary and that we're not living back in the day oflandline phones. The second part is that I'm a strong supporter of thedual-charter system. You have state credit unions and federal credit unions. Wehave to make sure that both the state and federal charters are able to serveconsumers equally.

Some states have relaxedtheir FOM rules and we've seen some credit unions move from federal to statecharters. How much of a role does that play in the importance of implementingthe NCUA's FOM rule?

It'sour responsibility to make sure that our [federal] charters don't lag behind. Iknow that there are some federal charters that changed to state charter becausethe NCUA hasn't acted, and that's a signal that we need to step up. Congresshas told us we need to keep our rules and regulations contemporary. So that'san indicator that we need to act. But unlike the FDIC, which is an insurer, andthe OCC, which is a regulator, we're both. We insure the state charters and thefederal charters. So we're kind of agnostic on that except for the fact that wedo want to make sure that consumers have equal choice. And if charters arebeing changed because one is too restrictive, then we need to say, "Whatcan we do under the authority and the responsibility that Congress has given usto try to equalize that?" The charter changes are a canary in the coalminethat tells you, "Are you keeping up, Rick? Are you keeping up, Mr. McWatters?"

What are the primarychallenges that you and board member McWatters face now as a two-man board?

It'snot really that different. We're only a three-person board at max, which meansyou still have to have one other person in agreement to move forward.Everything in regulation, like in life, is all about the art of the possible.And you have to be willing to compromise to make things better today than theywere yesterday. I think most people would say that we're working together verywell.