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Hyland stresses ALM third party due diligence
WASHINGTON (7/30/08)—Credit unions in today’s economy should pay special attention to asset-liability management and third-party due diligence, advised National Credit Union Administration (NCUA) Board Member Gigi Hyland in remarks this week to the Metropolitan Area Credit Union Association, a group of Washington, D.C.-area credit unions. Today about half of credit union assets are in real estate lending, often supported with more volatile shorter-term deposits. The combination underscores the importance of asset-liability management, said Hyland, calling this one of NCUA’s “hot examination issues.” A second hot issue is third-party due diligence, one Hyland recalled was a concern back when she was a private-sector attorney and saw too many credit union clients prepared to sign contracts that would have left them with excessive liability. She urged credit unions to read NCUA’s December 2007 letter to credit unions and the agency’s AIRES questionnaire on due diligence, and watch the webinar she hosted on this subject earlier this year which included and series of frequently asked questions on this subject, all available on the agency’s web site, www.ncua.gov. One the executive compensation recommendations of NCUA’s Outreach Task Force, which Hyland chaired, she said further action is awaiting a review by the agency’s new chairman, Michael Fryzel, and the full NCUA board “to evaluate how we go forward with that.” CUNA opposes the executive compensation disclosures called for by the task force, arguing they are unnecessary. With the housing bill now passed by Congress and on its way to the president, Hyland was asked if the agency is considering a letter to credit unions on its possible impact, specifically whether the legislation’s Federal Housing Administration loan workout provisions intended to stem foreclosures may force more second-mortgage lenders, such as credit unions, to walk away from home equity loans. “We need to see what the final bill looks like and what type of regulatory guidance we might issue in conjunction with the FFIEC [Federal Financial Institution Examination Council],” Hyland responded.
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