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NCUA intends new ROA letter this summer
WASHINGTON (5/15/08)—Dave Marquis, director of National Credit Union Administration’s (NCUA's) Office of Examination and Insurance, said Wednesday that his agency intends to release more guidance for credit unions regarding appropriate levels of return on assets. Marquis said the agency wants to emphasize that while credit unions clearly need ROA relief, they have a responsibility in turn to execute careful strategic planning and balance sheet management. During a recent Credit Union National Association (CUNA) ROA webinar, Marquis referred to an NCUA August 2006 evaluation of earnings letter, which clarified agency examiners' expectations regarding ROA. The letter said examiners are instructed to evaluate each credit union’s earnings level relative to net worth needs, as opposed to a fixed numerical target such as 1%. Marquis noted that if the letter was written today, the agency might envision ever lower levels of ROA than it did then. On Wednesday Marquis said he would expect the agency’s further guidance to be available this summer. He advised that credit unions must be prepared to identify how they manage their ROA. “(Credit unions) have a responsibility to manage it instead of just letting it happen,” Marquis told CUNA’s News Now. “This is really good news for credit unions,” said CUNA Chief Economist Bill Hampel. “This doesn’t give credit unions license to ignore ROA. A credit union will need to be able to justify why it is managing to a lower level of net income. “But this at least clear’s the path for a credit union to prudently follow an appropriate net income strategy. In today’s economy, a credit union with a high capital ratio needn’t penalize members with unattractive pricing just to maintain a higher-than-necessary ROA.” Use the resource link below to register for archived webinars.
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