Extraordinary New Powers Sought

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WASHINGTON-NCUA called on Congress last week for extraordinary new powers that would extend the statute of limitations on charging officers and directors of failed credit unions to as long as 10 years, which would help the National CU Share Insurance Fund recover for losses paid out in those cases.

The request, made by NCUA Chairman Debbie Matz during a hearing before the Senate Banking Committee, comes as some officers and directors of WesCorp FCU are challenging a civil suit brought by NCUA over their responsibilities for the failure of the one-time $34 billion corporate, claiming the current statute of limitations excludes the NCUA charges.

NCUA proposed authority to pursue any alleged violation of law brought against any official of a credit union or third party involved in the affairs of the credit union going back ten years prior to the failure of NCUA conservatorship.

The extension of the statute would allow NCUA greater powers to file claims against officers and directors of failed credit unions, Matz said. "This would provide parity with similar authority already provided to FDIC, clarify other ambiguities in the statute, and allow the NCUSIF to better mitigate losses."

NCUA also plans to ask Congress again for additional powers to examine the books of all private-sector third-party credit union vendors, including CUSOs, a power that other federal regulators already have.

"Credit unions," said Matz. "are increasingly relying on third-party vendors to support technology-related functions such as internet banking, transaction processing, and funds transfers. Vendors are also providing important loan underwriting and management services for credit unions. The third-party arrangements present risks such as threats to credit risk, security of systems, availability and integrity of systems, and confidentiality of information. Without vendor examination authority, NCUA has limited authority to minimize risks presented by vendors."

Matz told the Senate panel that the total cost of the corporate credit union bailout is currently estimated at $15.2 billion, with credit unions already having paid about $7 billion, meaning they will pay another $7 billion to $9 billion over the next ten years. "It is important to note," Matz said, "that all of this is being borne by the credit union industry and not taxpayers."

She also noted that more than $2 billion of special assessments over the past two years have increased a dwindling reserve ratio for the NCUSIF to an adequate level.

Matz also renewed requests to allow credit unions to raise alternative capital and to count it as net worth, and to raise the maximum allowable limits on member business loans from 12.25% of assets.

At least one senator, Democrat Jack Reed of Rhode Island, questioned the endorsement of increased MBL lending limits because Matz expressed concerns about growing delinquencies in credit union MBLs. Matz said she is concerned about the growing delinquencies among MBLs, but still supports an increase in the limits, which has been long-sought by credit unions.

Matz told the senators that NCUA's recent takeover of the three failed corporates and its program to securitize as much as $50 billion of legacy assets in those and the two other failed corporates appears to have stabilized the corporate system, but she expressed concern at growing numbers of problem natural person credit unions. "While NCUA is working diligently with affected credit unions to resolve problems in weaker institutions, the level of troubled credit unions will also depend heavily on the pace of the economic recovery," she said.

Consequently, NCUA has stepped up its supervision program significantly, hiring an additional 100 examiners over the past two years and increasing the frequency of on-site examinations to at least once a year, while boosting off-site oversight, as well, Matz said.

WASHINGTON-NCUA called on Congress last week for extraordinary new powers that would extend the statute of limitations on charging officers and directors of failed credit unions to as long as 10 years, which would help the National CU Share Insurance Fund recover for losses paid out in those cases.

The request, made by NCUA Chairman Debbie Matz during a hearing before the Senate Banking Committee, comes as some officers and directors of WesCorp FCU are challenging a civil suit brought by NCUA over their responsibilities for the failure of the one-time $34-billion corporate, claiming the current statute of limitations excludes the NCUA charges.

NCUA proposed authority to pursue any alleged violation of law brought against any official of a CU or third party involved in the affairs of the credit union going back ten years prior to the failure of NCUA conservatorship.

Greater Powers To File Claims

The extension of the statute would allow NCUA greater powers to file claims against officers and directors of failed credit unions, Matz said. "This would provide parity with similar authority already provided to FDIC, clarify other ambiguities in the statute, and allow the NCUSIF to better mitigate losses."

NCUA also plans to ask Congress again for additional powers to examine the books of all private-sector third-party credit union vendors, including CUSOs, a power that other federal regulators already have.

"Credit unions," said Matz. "are increasingly relying on third-party vendors to support technology-related functions such as Internet banking, transaction processing, and funds transfers. Vendors are also providing important loan underwriting and management services for credit unions. The third-party arrangements present risks such as threats to credit risk, security of systems, availability and integrity of systems, and confidentiality of information. Without vendor examination authority, NCUA has limited authority to minimize risks presented by vendors."

Matz told the Senate panel that the total cost of the corporate credit union bailout is currently estimated at $15.2 billion, with credit unions already having paid about $7 billion, meaning they will pay another $7 billion to $9 billion over the next ten years. "It is important to note," Matz said, "that all of this is being borne by the credit union industry and not taxpayers."

She also noted that more than $2 billion of special assessments over the past two years have increased a dwindling reserve ratio for the NCUSIF to an adequate level. Matz also renewed requests to allow CUs to raise alternative capital and to count it as net worth, and to raise the maximum allowable limits on member business loans from 12.25% of assets.

Raising MBL Cap Questioned

At least one senator, Democrat Jack Reed of Rhode Island, questioned the endorsement of increased MBL lending limits because Matz expressed concerns about growing delinquencies in MBLs. Matz said despite her concerns, she supports an increase in the limits, which has been long-sought by CUs.

Matz told the senators that NCUA's recent takeover of the three failed corporates and its program to securitize as much as $50 billion of legacy assets in those and the two other failed corporates appears to have stabilized the corporate system, but she expressed concern at growing numbers of problem natural person credit unions. "While NCUA is working diligently with affected credit unions to resolve problems in weaker institutions, the level of troubled credit unions will also depend heavily on the pace of the economic recovery," she said.

Consequently, NCUA has stepped up its supervision program significantly, hiring an additional 100 examiners over the past two years and increasing the frequency of on-site examinations to at least once a year, while boosting off-site oversight, as well, Matz said.

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