WASHINGTON (5/4/12)--In launching the first of her series of "Listening Sessions" to hear credit union concerns, National Credit Union Administration (NCUA) Chairman Debbie Matz acknowledged that there are concerns about regulatory burdens that are shared by many credit unions and she encouraged credit unions to raise those issues at the sessions.
At this week's Boston session, Matz said, "We can talk about anything except a specific credit union's supervisory issues," and told the group the agency's presentations had been minimized to give credit unions more time to raise their issues.
Among the 90 or more participating credit union officials were Dan Egan, president/CEO of the Massachusetts Credit Union League, New Hampshire Credit Union League, and Credit Union Association of Rhode Island, attended the session along with Credit Union Association of New York Credit Union President Bill Mellin, and Massachusetts/New Hampshire/Rhode Island leagues General Counsel Mary Ann Clancy. Most attendees were from NCUA's Region I, which includes the northeastern region of the country.
NCUA board Members Gigi Hyland and Michael Fryzel, along with senior NCUA staff, also attended. Deputy General Counsel Mary Mitchell Dunn participated for the Credit Union National Association.
A variety of concerns were brought up at the meeting by credit union officials. One credit union representative urged that NCUA examiners not simply focus on the negative aspects of a credit union's operations during their examination and indicated that the examination report should reflect positive developments at the credit unions as well as any less favorable ones.
NCUA officials agreed this should be part of the process and NCUA Director of Examination and Insurance Larry Fazio indicated that during agency training, such as the recent conferences in Florida, examiners are being encouraged to look at the whole picture at the credit union.
Another credit union official raised the issue of the credit union regulatory model and questioned whether NCUA is taking any role in standing up to other agencies, including the Consumer Financial Protection Bureau (CFPB), on issues that may mean more regulations for credit unions such as the regulation of overdraft protection programs.
Matz said that the agency does discuss concerns with other regulators and that she recognizes credit unions have raised legitimate issues about their overdraft protection plans. The CFPB currently is studying financial institutions' overdraft protection programs.
Whether the NCUA is planning to assess National Credit Union Share Insurance Fund premiums based on risk was another question and the agency clarified that such a move would require a statutory amendment. The NCUA clarified for CUNA that the agency is not contemplating pursuing such legislation.
The agency also is looking at risk management and ways to improve prompt corrective action. CUNA will be monitoring those efforts very closely.
Problems that credit unions have had getting approvals from NCUA was another matter, including when there is a waiver of a regulatory provision involved. The agency encouraged the participants to submit recommendations for improvements in the waiver process.
NCUA should seek more guidance from credit unions on how to solve problems, one participant recommended, and another questioned an NCUA examiner's limiting definition of the word "direct" as it relates to the experience requirement for those engaging in member business lending.
Another question: When might Nevada and California return to Region V? The questioner was told Nevada may return next year although that is not certain and NCUA did not indicate when California may return to its former region. Such decisions, based, in part, on consideration of resource needs, are made later in the year.
During the financial crisis, the NCUA shifted these states to NCUA Region II, which has a number of more experienced examiners.
The impact of credit union mergers and the consolidation that is ongoing in the system was also discussed, including what constitutes a "failed credit union," for purposes of agency takeover. Currently, the agency must "prove that by the numbers the credit union will fail" before the NCUA can treat the institution as one that will not revive.
Whether the NCUA would consider returning to an 18-month examination cycle was also raised. The agency was not positive about that recommendation, but CUNA and the leagues plan to continue that discussion with the agency, particularly for well-managed credit unions.
NCUA's Fazio echoed the chairman's remarks that, overall, communication between credit unions and examiners needs to be improved. "We need to do more to listen to credit unions" during the examination process, Fazio said.
A dialogue between credit unions and examiners should occur before, during, and after examinations, to avoid any surprises, he added. When examiners do find issues at a credit union, they should give credit union management a chance to explain how they would deal with the issue, and should accept the credit union's solution, if it is reasonable, he added.
Fazio also emphasized that examiners are being instructed to cite the specific legal authority for their directives. This has been a major concern for number of credit unions who have felt that the examiner was being arbitrary in ordering certain directives and not able to provide any legal basis for their directives.
Also during the session, Matz noted CUNA for its work with the CFPB and said CUNA has been "very engaged." She also noted CUNA's efforts to bring together accounting experts to discuss issues regarding troubled debt restructuring (TDR) that led to the development of the NCUA's recent TDR proposal. The proposal may be on the agency's monthly meeting agenda May 24.
Other listening sessions have been planned for:
- May 9 in Alexandria, Va.;
- June 5 in St. Louis, Mo.;
- June 13 in Orlando, Fla.;
- July 10 in San Diego, Calif.; and
- July 31 in Denver, Colo.
The sessions are scheduled to be held between 1 and 4 p.m. (ET). Registration is limited to the first 150 reservations.
CUNA and league officials are planning to attend all sessions to hear what credit unions raise as well as the NCUA's responses, and will follow up with its Examination and Supervision Subcommittee and the NCUA on key issues brought p during the sessions.
For more on the sessions, use the resource link.