RALEIGH, N.C. (3/19/12)--Nearly a third of North Carolina's 48 state-chartered credit unions say they may switch to a federal charter if a dispute about the disclosure of CAMEL scores and the use of dual exams between state and federal regulators is not resolved, the North Carolina Credit Union League revealed Wednesday.
The league surveyed all but two of the 48 state-chartered credit unions in the state on the impact dual exams likely would have.
These most recent developments occurred after the Raleigh, N.C.-based State Employees' CU (SECU) received authorization from its state regulator and disclosed its state-issued CAMEL score (News Now
The National Credit Union Administration (NCUA) has disputed the disclosure of the credit union's CAMEL rating, for several reasons, saying the state provides the rating to the NCUA, which treats it as confidential information. The NCUA discontinued its coordinated examinations with the state regulator, the North Carolina Credit Union Division (NCCUD), opting instead to begin separate exams for state-chartered federally insured credit unions in the state. In other states, the NCUA routinely conducts joint safety and soundness examinations with the state regulator.
A Dec. 6 letter from NCUA to NCCUD alleges that the North Carolina Credit Union Administrator announced that NCUA had initiated the process of termination of National Credit Union Share Insurance Fund insurance of SECU share accounts, and that confidential exam documents had been leaked.
League survey results indicate that 30% of the 39 credit unions responding are "very" or "somewhat" likely to convert to a federal charter if the situation is not resolved and the two- examination structure is maintained in future years. An additional 38% of respondents say they are undecided about a potential charter switch, and less than a third (31%) respond that it is "unlikely" they will convert.
The league also asked credit unions if they planned to switch charters if the three-month old dispute was resolved prior to 2013. More than 80% responded they were "very" or "somewhat" unlikely to convert if the two agencies began working together again.
"The results speak for themselves," noted NCCUL President/CEO John Radebaugh. "Credit unions appreciate the value of the dual charter, but they do not appreciate the regulatory and operational burden they've been placed under. Clearly, credit unions want a resolution to this situation, and they are willing to reconsider their chartering status if the regulators can't find a way to resolve their differences."
The survey also asked credit unions about the operational impacts and regulatory burden an added in-person examination presented.
Taken together, the league said the survey results reveal some troubling conclusions:
- Left unresolved, the dual exam structure threatens to further erode the value of the state charter in North Carolina.
- Conflicting examination findings and the lack of a working relationship between NCUA and NCCUD have further complicated an already complex operational environment.
- The credit unions with the fewest staff resources and the greatest day-to-day operational challenges have been hit the hardest.
- The dual examination structure continues to place further regulatory and operational burdens on credit unions.
The CAMEL rating system is NCUA's method of evaluating the health of credit unions. The rating, adopted by the NCUA in 1987, is based upon five critical elements of a credit union's operations: (C) Capital, (A) Asset quality, (M) Management, (E) Earnings and (L) Asset- liability management.
To see the North Carolina league survey results, use the link.