Royce, Kanjorski Unveil Legislation to Improve and Modernize Credit Unions
New CURIA will allow credit unions to better serve their 86 million members

WASHINGTON -  Congressmen Ed Royce (R-CA) and Paul E. Kanjorski (D-PA), two senior Members of the House Financial Services Committee, today unveiled a revised bill that will modernize and improve the quality of service that our nation's credit unions provide.

Often referred to by its acronym of CURIA, the new Credit Union Regulatory Improvements Act of 2005 [H.R. 2317] combines a series of regulatory enhancements that will allow credit unions to operate more effectively and efficiently. Specifically, CURIA modernizes credit union net worth standards; advances credit union efforts to assist small businesses and promote economic growth; and modifies credit union regulatory standards by eliminating unnecessary, burdensome and outdated regulations, as well as making other reforms to credit union oversight and governance.

"The new CURIA is a comprehensive bill that will help credit unions to provide better services to their 86 million members," said Congressman Royce. "CURIA's improved safety-and-soundness provisions are of the utmost importance to me. Based on the recent recommendations of the federal credit union regulator, these enhanced risk-based standards will ensure the efficient allocation of capital, while protecting taxpayers."

CURIA improves upon similar bipartisan legislation introduced in the 108^th Congress, primarily in the area of credit union capital standards. In order to make these standards comparable to those now in place for FDIC-insured financial institutions, the new CURIA implements a risk-based capital system for credit unions. The bill's provisions establish risk-based capital requirements and revise the minimum capital standards for credit unions. These changes are based on recent recommendations by the National Credit Union Administration.

"We developed the new CURIA to address concerns raised by leaders in the credit union community and others," noted Congressman Kanjorski. "For example, small businesses are the backbone of our economy and they need loans to survive and grow. However, loans to small businesses have materially decreased, according to new studies by the Small Business Administration and the Atlanta Federal Reserve Bank. In order to allow small businesses to continue to create more jobs and spur economic growth, the new CURIA will help credit unions to fill this void."

Like the prior legislation, the new CURIA raises the arbitrary cap on member business lending by credit unions imposed by Congress during consideration of the Credit Union Membership Access Act of 1998. The bill will also help credit unions to promote economic growth in underserved communities.

"Credit unions today are among the most highly regulated and restricted of all depository institutions. The new CURIA will ease these regulatory burdens responsibly and help credit unions to succeed in the 21^st Century," added Congressman Kanjorski.

A bipartisan group of more than a dozen Members joined Congressmen Royce and Kanjorski to introduce the improved bill, signaling that momentum for the new CURIA is already building. The attached summary provides further details about the comprehensive bill's many elements. The Financial Services Committee is expected to begin consideration of the issues raised in the new CURIA during the hearings on regulatory relief scheduled for later in May.

Saying that CURIA will allow credit unions to better serve their members, Sharon Custer, an executive with BMI Federal Credit Union in Columbus, Ohio, commented, "As a not-for-profit cooperative, our credit union exists to serve our members. We must be able to offer the quality services our members want, or they will go elsewhere for them. I am very supportive of CURIA because it will give my credit union the flexibility it needs to grow, keep pace with our members' needs, and attract the next generation of our membership."

Congressman Royce concluded, "In the last Congress, similar legislation garnered the support of nearly 70 Members of Congress.  The new CURIA is greatly improved and builds upon recommendations made by many experts, including credit union regulators and executives. We therefore hope to get even greater support in the 109^th Congress for the new CURIA and enact this important bipartisan legislation into law."

*** Editor's Note: See attached one-page summary for specific details of H.R. 2317. ***

###Summary on the Credit Union Regulatory Improvements Act of 2005

H.R. 2317, the Credit Union Regulatory Improvements Act of 2005, contains three major sections to (1) modernize credit union net worth standards, (2) advance credit union efforts to promote economic growth, and (3) make several needed modifications to credit union activities, governance, and oversight.  The bill is often referred to by its acronym - CURIA.

Capital and Net Worth Reform

The first major section of CURIA would update the capital structure of credit unions.  The title contains the recommendations for capital and net worth reform proposed by the federal regulator responsible for the safety and soundness of the credit union system - the National Credit Union Administration (NCUA).  In a report issued in April 2005, NCUA concluded that modifications to the Prompt Corrective Action (PCA) system are needed to ensure that the standards are aptly robust, and not unduly burdensome or constraining.  Congress established the current inefficient PCA system as part of the Credit Union Membership Access Act of 1998.

CURIA's meaningful capital standard revisions are needed to safeguard the federal insurance fund, taxpayers, and the nation's credit union system.  Unlike the cookie-cutter approach to risk underlying the initial implementation of PCA in 1998, the bill would allow NCUA to develop a more fully robust and modern risk-based capital regime.  These proposed changes are similar to the capital standards now applicable to FDIC-insured institutions.

Economic Growth

The second section of CURIA would help America's credit unions to promote economic growth in several ways.  For example, the bill would make modest modifications to limits on credit union business lending put in place by Congress in 1998.  When Congress initially imposed these limits, it realized that such action was arbitrary.  As a result, it instructed the Treasury Department to conduct a thorough study of credit union business lending.

Released in January of 2001, the Treasury study found that "...credit union member business loans share many characteristics of consumer loans" and that "...these loans are generally smaller and fully collateralized, and borrower risk profiles are more easily determined.  As a result, the credit risk associated with member business loans may be less than that for most bank and thrift commercial loans."  Recent studies by the Federal Reserve Bank of Atlanta and the Small Business Administration have also found a real need for more small business lending.

Accordingly, CURIA would update the arbitrary 12.25% of assets cap placed on credit union member business lending in 1998 and replace it with a more practical level of 20% of total assets.  This 20% cap would be equal to or stricter than business lending caps imposed on thrifts.  CURIA would also exclude loans under $100,000 and those to nonprofit religious organizations from the business lending calculation, and it would help credit unions to promote economic growth in underserved communities.

Regulatory Modernization

The final section of CURIA would provide credit unions with limited relief from certain specific outdated regulatory burdens and make other necessary changes to the credit union regulatory system.  Among other things, CURIA would improve credit union leasing arrangements on federal land, permit limited investments in securities, improve credit union governance, and alter credit union conversion voting requirements.