ALEXANDRIA, Va. — Federal credit union failures dropped by close to a quarter from 22 in 2012 to 17 in 2013, NCUA reported Thursday.
NCUA Chairman Debbie Matz attributed the decline in failures and estimates of lower losses in the industry to an improved economy and the success NCUA has had in persuading federal credit union executives to prepare for the risk of expected interest rate increases as the Federal Reserve pulls back on its bond purchases.
Of the 17 credit unions that failed last year, 13 were from voluntary liquidations and four from assisted mergers in contrast to the 14 liquidations and eight assisted mergers that accounted for the 22 failures in 2013.
NCUA Chief Financial Officer Mary Ann Woodson said some of the failures last year were due to fraud but she didn't know how many.
Woodson told an NCUA board meeting she is confident the $220.7 million in the shared insurance fund's reserves should be adequate to meet its needs. In the middle of last year, the reserves were lowered by $41.1 million because of diminished loss estimates with the rebound in the economy.
At its February session, the board proposed to modernize and lower the costs of voluntary liquidations
The rules had last been revised in 1993. Since the start of the financial crisis in 2008, two federal credit unions have chosen to liquidate per year.
While the measures make the process easier, Matz said the move should not be viewed as NCUA encouraging credit unions to liquidate.
Among the steps NCUA took to bring voluntary liquidation into the 21st century, federal credit unions that choose to disband will be allowed to file creditor notices in electronic media and to make member share payouts electronically for the first time.
In addition, the regulator wants to raise the asset threshold for liquidating credit unions obligated to make multiple creditor notices from $5 million to $50 million to align the benchmark with the agency's current definition of small credit unions.
The public comment period officially ends in 60 days after the rules are published in the Federal Register likely in the next week. However, federal regulatory agencies nearly always accept submissions after the formal due date.
