The Defense Credit Union Council (DCUC) just weighed in on a couple of regulatory proposals from the Federal Housing Finance Agency (FHFA), and the short version? They’re all for it.
This week, DCUC submitted official comments supporting two separate FHFA initiatives: one tweaking the Suspended Counterparty Program (SCP) and another scrapping the New Business Activities (NBA) regulation altogether. Both moves, according to DCUC, are wins for clarity and common sense.
Out With “Reputational Harm”
First up is the FHFA’s proposal to remove the term “reputational harm” from its SCP regulation. Think of this as regulatory spring cleaning—getting rid of vague language that doesn’t add much value.
In their letter, DCUC gave this change a thumbs up. Why? Because it eliminates redundancy and ensures the FHFA’s supervision of counterparty risk focuses on risks you can actually measure. No more nebulous concepts that leave everyone scratching their heads.
DCUC also pointed out that this approach aligns with how other regulators—like the NCUA—handle “reputational risk.” Consistency across agencies? Now that’s something worth celebrating.
The bottom line: DCUC believes this amendment brings much-needed clarity and transparency to FHFA regulations, which is always a good thing in the world of financial oversight.
Goodbye, NBA Regulation
The second proposal DCUC is backing involves repealing the New Business Activities regulation entirely. And honestly, it’s hard to argue with their reasoning.
According to DCUC’s comments, the current NBA requirement doesn’t pack much of a punch. Very few new business activities from the Federal Home Loan Banks (FHLBs) actually hit the risk threshold that would trigger the need to submit an NBA notice in the first place. So what’s the point of keeping it around?
Here’s the thing: even without this specific regulation, the FHLBs aren’t operating in the Wild West. They’re still subject to ongoing supervision through FHFA examinations, which covers the development of new business activities. Any legal, policy, or supervisory concerns can—and do—get flagged during that process.
Plus, as DCUC noted, the FHLBs have every incentive to loop in the FHFA early when they’re cooking up something new. Nobody wants to deal with costly problems or resource drains down the road because they didn’t get the regulatory green light upfront.
“Our position is that requiring submission of an NBA notice is duplicative and unnecessary, and the regulation’s repeal will not negatively impact the safety and soundness of the FHLBs,” said Jason Stverak, DCUC Chief Advocacy Officer.
Translation: this regulation is bureaucratic busy work that doesn’t make the system any safer. Time to let it go.