DCUC Backs FHFA Moves To Drop ‘Reputational Harm'
By CU Today Staff —
WASHINGTON--The Defense Credit Union Council has filed comments with the Federal Housing Finance Agency in response to its proposal to amend its Suspended Counterparty Program (SCP) regulation by removing the term "reputational harm."
In its letter, DCUC expressed support for the FHFA's regulatory amendment, as the change would eliminate regulatory redundancy and affirm that the FHFA’s supervision of counterparty risk is based on measurable risks. DCUC stated that the amendment is consistent with other regulators' approaches, such as the NCUA's, regarding "reputational risk."
Overall, DCUC said it believes this regulatory change would provide greater clarity and transparency to the FHFA's regulations, which DCUC strongly supports. DCUC also expressed support for the FHFA's notice of proposed rulemaking to repeal the New Business Activities (NBA) regulation. DCUC commented that this current regulatory requirement has a minimal impact on the Federal Home Loan Banks’ (FHLB) deployment of new products and services to their members, as very few of the banks’ new business activities rise to the risk level that would trigger an NBA notice submission.
Additionally, DCUC noted that without this provision, the FHLBs are still subject to ongoing prudential supervision through the FHFA’s examination function, which includes the development of NBAs, and any legal, policy, or supervisory issues can be raised during this process.
DCUC expressed that FHLBs have an incentive to involve the FHFA early in the process when developing an NBA to avoid any future issues that are costly or drain resources.
“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 DCUC Chief Advocacy Officer Jason Stverak.
Originally reported by CU Today.