NCUA Vice Chairman Kyle S. Hauptman Statement Following Board Briefing on the NCUA’s 2022 Supervisory Priorities

As Prepared for Delivery on January 27, 2022

Thank you, Mr. Chairman, and thank you, Kelly, Naghi, and Matt, for this presentation. I appreciate the opportunity to ask questions about our supervisory priorities at a public board meeting as it supports transparency and, I hope, improves clarity.

One of the reasons I took this job was to address the issue of communication between the regulator and the regulated. You’ve heard me say before that we, as regulators, do not always realize the impact of our words on the credit unions.

I am grateful to see the section on the recording of official meetings. This is something the NCUA has allowed for years, provided that the agency gets a copy of the recording. Until the pandemic created this forced experiment on remote access however, we didn’t have an easy and less awkward way of recording. Now we do.

Recording meetings benefit the credit union, the examiner, and the agency. It provides a record of exactly what was said — maybe not what was meant — but there is no argument about the words used. It also provides a historical record of past exams, which should be useful to new board members, credit union executives, and examiners. It’s also never been easier to record exams given programs like Zoom and Teams. It’s already common practice at many government agencies as well as in the private sector, and I’m sure it will prove to be a godsend in many situations.

Speaking of clear communication, I’d like to comment on a couple of other topics that are new to the supervisory priorities. Participation loans and call report changes. On participation loans, credit unions must utilize safe and sound practices as they manage their loan portfolios. This seems self-evident, but over the past year, I’ve heard from several credit unions that have expressed frustration over our lack of clarity on due diligence and confusing definitions for reporting. I’m concerned that because we haven’t been crystal clear about the details of our expectations and definitions, some credit unions have chosen not to utilize this helpful option. Now that participation loans and eligible obligations are part of our supervisory priorities, we owe clarity to the credit unions and to examiners.

The section on capital adequacy and risk-based capital requirements referenced Call Report changes. First, I want to thank Mary Jo Thor, Vicki Brog, Angela Veghts, and Paul Maki, for the work they did on the modernized Call Report. I think the revised report is a flat-out better product and will pay dividends in the future.

But change isn’t always easy — even when the change is for the better. Depending upon which credit unions you talk to, some feel these changes are too much too fast and others believe they will manage them well. Either way, we must be flexible and understanding as some credit unions struggle through the new reporting form. I encourage credit unions to watch NCUA’s February 10 webinar on the revised Call Report.

Thank you, Mr. Chairman. That concludes my remarks.