10 Things You May Not Know about NCUA
by: Debbie Matz, Chairman, National Credit Union Administration
The Listening Sessions I hosted around the country this year generated productive dialogues between NCUA and credit union officials.
Our intent was for both NCUA and credit union officials to learn from one another. NCUA officials learned about unintended consequences of certain rules and exam processes. We plan to address those issues this month, as we continue our efforts to provide regulatory relief wherever consistent with safety and soundness.
Also during the Listening Sessions, I hope credit union officials learned about NCUA. Attendees asked many questions about the agency which revealed some common misperceptions, however.
So I thought it would be helpful to share 10 things you might not know about NCUA:
1) NCUA cannot change regulations that are required by law and written by other agencies.
The most common complaints we hear about regulations concern rules mandated by acts of Congress, such as the Bank Secrecy Act and Truth in Lending. However, these regulations are imposed by other agencies following statutory mandates.
Any regulations imposed by statute can only be changed by Congress. NCUA can only change regulations that we have originated.
2) NCUA is making every effort to provide regulatory relief.
For regulations that NCUA can control, we are constantly seeking ways to reduce burdens on credit unions.
Under my Regulatory Modernization Initiative, we are reviewing all NCUA rules and listening to new ideas from the credit union industry. Whenever we find an NCUA rule has become outdated or is overly burdensome – and changing it will not threaten safety and soundness – we modify, streamline or repeal it consistent with President Obama’s Executive Order 13579 on Regulations and Independent Regulatory Agencies.
3) You can apply for waivers from key NCUA regulatory provisions.
Many of NCUA’s current regulations have built-in flexibility. For example, if you demonstrate sound business reasons, you can apply to your NCUA Regional Director to exceed the 5% limit on fixed assets. Likewise, you can apply for a waiver to exceed the 80% loan-to-value limit on member business loans.
We encourage credit unions to apply for blanket waivers, so you don’t have to keep reapplying every time you want to purchase a fixed asset or extend a member business loan.
4) Most mergers are voluntary, not driven by NCUA.
Over 90% of credit union mergers are voluntary. The most common reasons credit unions choose to merge are to facilitate succession planning and enhance member services – justifications that are very reasonable.
5) NCUA is providing a wider range of assistance to small credit unions.
During my first term on the NCUA Board, I advocated for creating an Office of Small Credit Union Initiatives (OSCUI). As small credit unions’ needs have evolved, OSCUI’s services have evolved as well. Under OSCUI Director Bill Myers (a former small credit union CEO), NCUA’s Economic Development Specialists serve as strategic planning consultants providing small credit unions with a wider range of assistance:
- Advising on succession planning, policies, marketing, budgeting, recordkeeping, field of membership, and new products;
- Writing Net Worth Restoration Plans and loan allowance analyses; and
- Training on fraud detection, asset/liability management, and fiduciary duties.
6) NCUA supports increased member business lending and supplementary capital for healthy credit unions.
When lawmakers ask about member business lending and supplemental capital, I express my strong support. I have presented testimony and written letters to House and Senate committees on both issues.
I believe the statutory cap on member business lending should be lifted to allow credit unions to diversify their portfolios by making business loans that will create jobs. And I believe healthy credit unions should be allowed to raise supplemental capital so they are not forced to discourage deposits from consumers seeking a safe place to save.
7) Your credit union may already qualify to make unlimited member business loans and raise supplemental capital.
If your credit union qualifies for a “low-income” designation, you could:
- Make member business loans beyond the statutory cap;
- Offer supplemental capital accounts;
- Accept non-member deposits; and
- Apply for grants and below-market loans from OSCUI.
Nearly 1,100 credit unions already have a low-income designation. In addition, we’ve streamlined the process for over 1,000 more eligible credit unions to accept the designation.
Previously, the application process involved a cumbersome process of calculations. So NCUA has removed the application burden by processing the calculations automatically for every credit union. This quarter, we began sending letters to federal credit unions that qualify for the low-income designation. Federal credit unions receiving these letters need only to accept the designation. Then they can begin to take advantage of all the benefits.
For state-chartered credit unions, their state regulator will decide whether or not to approve a low-income designation. But NCUA can help determine which state-chartered credit unions are eligible. We’ll be working with the National Association of State Credit Union Supervisors to streamline that process.
8) NCUA examiners know how it feels to be examined.
While some credit unions are complaining that their examiners are too tough, examiners are hearing from higher authorities who say they’re not tough enough. NCUA’s Office of Inspector General (OIG) conducts Material Loss Reviews of every credit union that costs the National Credit Union Share Insurance Fund at least $25 million. Invariably those reviews say NCUA shares part of the blame for each loss. OIG recommendations typically urge examiners to more proactively identify red flags at credit unions and act more quickly to resolve issues before they cause losses.
In addition, this year, Congress’ General Accounting Office issued a report titled, Earlier Actions Are Needed to Better Address Troubled Credit Unions. The report calls on NCUA to “consider additional triggers for PCA (Prompt Corrective Action) that would require early and forceful regulatory action and make recommendations to Congress on how to modify PCA, as appropriate.”
9) Credit union leaders participate in NCUA examiner training.
We understand the importance of opening a dialogue between examiners and credit union leaders outside the examination process.
Since all new NCUA examiners begin their careers examining small credit unions, we invite small credit union CEOs to make presentations during the early stages of our examiner training classes. This dialogue helps examiners to hear the perspectives of small credit union leaders and understand what makes these credit unions unique.
10) You have at least six different ways to appeal NCUA examination results.
Last quarter, I wrote about the six formal and informal ways to appeal examination results. Judging from the questions we received at the Listening Sessions, we cannot emphasize these appeal rights enough. In brief, the appeal channels include your examiner, Supervisory Examiner, Regional Director, Office of General Counsel, Office of Examination and Insurance, and Supervisory Review Committee.
For information about how to appeal, please see the CU Insight from June 7. As I said then, NCUA has an open-door policy to hear your appeals. If you think you have a situation in need of review, go ahead and knock!
Debbie Matz was nominated by President Barack Obama to serve as the eighth board chair of the National Credit Union Administration (NCUA). After confirmation by the U.S. Senate on August 7, 2009, she was sworn in on August 24, 2009. Mrs. Matz is no stranger to NCUA and credit unions having served as a board member at NCUA from January 2002 to October 2005.
NCUA is the independent federal agency created by the U.S. Congress to regulate, charter and supervise federal credit unions. With the backing of the full faith and credit of the U.S. Government, NCUA operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of nearly 92 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions. www.ncua.gov
