State board advances package to repeal, update banking and credit-union rules

The State Board of Financial Institutions voted to approve multiple regulatory changes Thursday aimed at removing duplicative rules and updating retention and dividend requirements for state-chartered banks and credit unions.

The package covers several items including the repeal of Regulation 5281 (income and expense statements), repeal of Regulation 5283 (authority for federally chartered institutions), a new record-retention regulation for credit unions (5285), an amendment clarifying the declaration of dividends by state-chartered credit unions (052986), an updated record-retention schedule for banks (5289), repeal of an outdated pilot for electronic funds transfers (5290), revisions on state bank dividend rules (5292) and repeal of an adjustable-rate mortgage rule for credit unions (5293).

The board’s staff told members the changes remove duplication between agency rules and existing statute or institutional reports. “The Board of Financial Institutions is proposing to repeal a regulation that requires banks to file income and expense reports alongside certain requests. The board already receives this information in the report of condition and the requirement in this regulation is duplicative,” Kathy Bickham, Commissioner of Banking, said. On record-retention items, staff said language was updated to reflect modern technology and to point state-chartered institutions to existing state nonprofit record-retention rules and applicable federal standards.

Board members repeatedly expressed support for simplifying old rules. Chairman (Speaker 1) repeatedly praised the effort to “get rid of regulations,” asking whether the agency was tracking repeals and joking about sending “thank you” letters to staff. Staff said regulated trade groups — including the bankers association and the Carolina Credit Union League — were consulted and that some changes were made in response to stakeholder feedback.

On dividend rules, staff described the amendments as formalizing operational instructions already in use. For credit unions, staff explained that “dividends … are just interest on the deposits” and that the revised rule incorporates a 2020 policy statement allowing credit unions to pay dividends that reduce undivided profits if they meet specified financial-condition criteria. On bank dividends, staff said the regulation would permit banks to pay “up to 100% of their current earnings each year in dividends” subject to guardrails and board oversight when an institution seeks to pay beyond ordinary limits.

Each regulation in the package was moved, seconded and approved by voice vote during the session. No roll-call tallies were recorded in the transcript; approvals were announced after voice votes.

The board’s staff said the rule updates are the result of a multiyear review intended to modernize regulations that in some cases predate widespread computer use. Several members urged continuing the review and noted the work had already reduced voluminous retention schedules to far shorter, more technology-aware text.

Votes at a glance: The transcript records voice approvals for items identified as Regulation 5281, 5283, 5285, (052986) amendment on credit-union dividends, 5289, 5290, 5292 and 5293; each motion was called, seconded and adopted by voice vote.

The board did not set effective dates in the discussion recorded; staff indicated some changes reflect statutory amendments and others incorporate prior board policy into regulation. The board said it will continue to track regulatory repeals and amendments and to consult affected trade organizations as it completes the multiyear cleanup effort.