Yellen: NCUA Lack of Oversight Power is ‘Gap That Needs to be Filled’
Senate Banking Committee hearing touches on both NCUA oversight powers and impact of climate change on financial system.
Treasury Secretary Janet Yellen on Tuesday joined the chorus of regulators who say the National Credit Union Administration (NCUA) should have oversight powers to supervise credit union third-party servicers.
Ossoff said he is currently working on legislation to give the NCUA power that the other banking regulators already have.
FSOC, the NCUA’s Inspector General and members of its board, and the Government Accountability Office have asked Congress to grant the agency oversight capacity. The NCUA once held that power, but it expired in 2001.
NCUA Warns of Widespread Harm to Credit Unions
“This growing regulatory blind spot has the potential to trigger cascading consequences throughout the credit union industry and the financial services sector that may result in significant losses to the National Credit Union Share Insurance Fund,” the NCUA claimed, in a March report.
Traditionally, credit union trade groups have opposed such proposals, saying they would increase costs as well as the regulatory burden credit unions face.
A Clash Over Climate Change
Tuesday’s hearing also saw Yellen and Republican senators clash over FSOC’s decision to classify climate change as a systemic risk to the U.S. financial system.
“To address these risks, the council recommended that regulators build their capacity and expand their efforts to address climate-related risks, improve the availability of data, enhance and standardize disclosures, and assess and mitigate risks to financial stability,” Yellen told the committee.
She noted further that in October 2021 the council released a report demonstrating how climate change can be a source of shocks to the financial system and increase risks to financial stability. Additionally, she explained, the council has formed its own committee to serve as a coordinating body for its members to share information and help develop common approaches and standards.
Senate Banking Committee Ranking Republican Sen. Patrick Toomey of Pennsylvania sharply criticized both Yellen and FSOC for identifying climate change as a systemic risk.
“There’s really no physical risk that’s even remotely imminent,” he told Yellen, adding that since she became Treasury secretary, FSOC has held seven meetings to discuss climate change, but has not discussed cybersecurity at all.
“Cybersecurity poses a much more imminent risk,” he said.
Where the NCUA Stands on Climate Change
NCUA Chairman Todd Harper, a Democrat, is a member of FSOC and endorsed the council’s October report. However, his Republican board colleagues, Rodney Hood and Kyle Hauptman, have been much more skeptical about the role financial regulators have in dealing with climate issues.
Sources have said the agency’s most recent strategic report was delayed several months as board members haggled over climate language and how it should be included. When the report finally was adopted, both Hauptman and Hood emphasized climate change was an issue individual credit unions may decide how to handle on their own.