Off the Record, On the Issues with John

​NCUA is advancing deregulation and deposit flexibility, signaling a shift toward more practical, risk-focused rules.

By John Alexander, DakCU Director of Legislative & Regulatory Affairs

Deregulation Review Targets Outdated Merger Requirements
The National Credit Union Administration (NCUA) continues to move through its deregulation review, and two recent items are worth watching for Dakota credit unions.

The first is NCUA’s tenth round of deregulation proposals. This round focuses on credit union bank conversions and mergers under Part 708a. The proposal would remove or revise several requirements NCUA says are outdated, overly prescriptive, or duplicative. That includes changes to merger communications, newspaper notice requirements, due diligence reporting, formatting rules, plain-language standards, and voting guidance.

For credit unions, the larger issue is not just mergers. It is whether federal rules are written in a way that actually helps members, boards, and examiners understand the process.

Dakota credit unions do not need more process for the sake of process. They need clear rules, reasonable disclosure expectations, and enough flexibility for boards to communicate with their members in a practical way. A website notice may reach members more effectively than a newspaper notice in many communities. A clear board record may matter more than checking every formatting box in a regulation.

That does not mean merger decisions should be taken lightly. Mergers involve member ownership, member choice, board judgment, due diligence, and long-term service to the community. But the process should focus on the substance of the decision, not outdated procedural requirements that may add cost without improving member protection.

Deposit Flexibility and Liquidity Considerations
The second item is NCUA’s recent briefing on brokered and reciprocal deposits. NCUA reviewed FAQs confirming that federally insured credit unions may use brokered and reciprocal deposit arrangements. These tools can help with liquidity management, deposit gathering, and balance sheet planning. NCUA also made clear that overreliance can create risk and may affect supervisory review.

That is the right way to look at it. These tools are not automatically good or bad. They are tools.

For some credit unions, brokered or reciprocal deposits may help manage liquidity pressure, serve members, or compete in a changing deposit market. For others, they may not fit the balance sheet, pricing strategy, or risk profile. The key question is whether management and the board understand the cost, concentration risk, funding stability, and examiner expectations before using them.

Dakota credit unions should treat this as a flexibility issue, not a shortcut. Liquidity tools are useful only when they are tied to a clear plan. That means policies should be updated, board reporting should be clear, and management should be able to explain why the credit union is using the tool and how it fits the institution’s overall funding strategy.

A Shift Toward Practical, Flexible Regulation
Both developments point in the same direction. NCUA is continuing to review rules that may be too rigid, too dated, or too process-heavy. At the same time, credit unions are being given more room to make business decisions based on their own risk profile.

That is a positive direction for the industry, especially for smaller and rural institutions that do not have unlimited compliance staff. Regulatory relief should not weaken safety and soundness. It should make the rules clearer, more practical, and more focused on real risk.

Your Association will continue watching these proposals and will look for opportunities to support changes that reduce unnecessary burden while preserving strong member protections.
 
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