On Thursday, the House Financial Services Committee convened a hearing on Capitol Hill titled “Oversight of Prudential Regulators,” featuring testimony from:
Collectively, the regulators outlined an agenda focused on:
While each agency emphasized different priorities, several themes emerged consistently throughout the hearing.
One of the strongest messages from regulators was a desire to refocus examinations and supervision on material financial risk rather than procedural compliance exercises.
With respect to credit unions, Chair Hauptman highlighted the NCUA’s “deregulation” program and criticized the former NCUA practice of “regulation by enforcement.”
Regulators also highlighted efforts to modernize existing rules and reduce unnecessary burden. Topics discussed included capital requirements, anti-money laundering compliance, third-party risk management, model risk management, merger review processes, and de novo charter formation.
A salient discussion item among regulators was the need for a diverse financial system. In a touching closing statement, Chair Hauptman mentioned this would likely be his last hearing.
He shared, “We want to be a country that has every niche covered, including immigrants, including veterans and other groups. We don’t want to be like Australia that has four banks for the whole country, or Canada that has six. We want to have all niches covered, which includes banks for soybeans and others that know the Broadway industry in New York. We want financial institutions that know every nook and cranny within an industry and their financial needs.”
Perhaps the most notable theme for the future of financial services was the degree to which digital assets have become integrated into the regulatory conversation. During his opening statement, Chair Hauptman shared that stablecoins will make payments faster, and more accessible.
Rather than debating whether stablecoins, tokenized assets, and digital asset infrastructure should exist, regulators are increasingly focused on establishing the rules under which these activities will operate. A provision that credit unions advocated for in the GENIUS Act was discussed in the hearing.
The GENIUS Act includes a provision that prohibits stablecoin issuers from paying yield or interest on payment stablecoins. California’s Credit Unions and America’s Credit Unions flagged for legislators that allowing passive yield on digital assets can encourage deposit flight and leave consumers in a vulnerable position.
During the hearing, Congressman Brad Sherman echoed this concern by stating he expects regulators to fully implement that provision, further opining that “the smartest, or at least the best-paid lawyers in the country, are being paid to try and evade that requirement.”
On May 19, the Trump Administration issued an executive order (EO) entitled “Restoring Integrity to America’s Financial System,” which requires financial regulators to outline risks associated with lending to immigrants with an Individual Taxpayer Identification Number (ITIN).
Republican Congresswoman Maria Salazar of Florida and Democratic Congressman Sean Casten of Illinois both asked questions on this EO. Congresswoman Salazar shared, “This executive order can be damaging to the average citizen” and pointed out that the directive could cause the OCC to “act as the Customs and Border Protection.” Mr. Gould did not share Congresswoman Salazar’s concerns, but rather focused on addressing safety and soundness.
“I think the president’s [initiative] is a common-sense reaction to well-understood and documented concerns that we are seeing in terms of fraud, money laundering, etc.,” Gould said. “From my perspective, as a safety and soundness supervisor, I want to make sure that the banks we supervise understand the nature of the financial risk that their customers may pose.”
While the near-term impact on credit unions may be limited, regulators are laying the groundwork for a financial system increasingly shaped by stablecoins, tokenization, artificial intelligence, and digital assets.
As these frameworks evolve, credit unions will need to evaluate their role in an increasingly digital financial ecosystem.
