Federation's Hope For 2011: Exams That Account For CDCU Difference
NEW YORK — Cliff Rosenthal is hopeful that 2011will be a year in which NCUA examiners gain a better understanding of the unique operating characteristics of low-income and community development credit unions.
The president of the National Federation of Community Development Credit Unions said that while NCUA has made progress in having examiners understand the special operating characteristics of low-income credit unions (LICUs) and community development credit unions (CDCUs), there remains a great deal of room for improvement. The Federation, Rosenthal explained, has been "monitoring where the rubber hits the road" in terms of examiners following NCUA's direction on reviewing these institutions.
Rosenthal referred specifically to the supervisory letter NCUA issued in January 2010 indicating that field staff should consider the special challenges small CUs face. While pleased with the letter, the Federation is concerned many examiners are not getting the message, and NCUA will be hiring a large number of new examiners. Last month Rosenthal sent a letter to NCUA sharing concerns that the examination process on LICUs and CDCUs has been inconsistent and unduly harsh due to examiners' lack of knowledge of these institutions.
"We surveyed our members and we think there has been progress in getting examiners to understand the uniqueness of our credit unions," Rosenthal said. "Many have clearly read the letter and gotten training. But there are also numbers who have not seen the letter or really paid much heed to it."
The next 12 months will be critical for LICUs and CDCUs, particularly as many of the new NCUA examiners will likely be assigned to small CUs due to NCUA's perception that small institutions are less complex and present a lower risk to the share insurance fund, Rosenthal said. "We have concerns that the stakes are higher now. Our credit unions are vulnerable-we hear that NCUA is intensifying its examination cycle and that it is going to be doubly strict on documents of resolution. This is going to be life-and-death stuff. So we have to be absolutely sure that examiners do their part-get the training they need-to learn who we (LICUs and CDCUs) are."
Rosenthal concluded there is a "strong headwind" blowing toward small CUs as a result of NCUA tightening regulations to avoid more NCUSIF losses. "It's always been a balancing act, but in the last two years of the financial crisis, the high wire for our credit unions and the Federation has been raised 500 feet and their ain't no safety net."
Rosenthal is pleased that 48 credit unions will enter 2011 in a stronger capital position as a result of the Treasury's Community Development Capital Initiative, and that Federation membership has grown as a result (15%).
This year, Rosenthal said that among a number of projects, the Federation will focus on expansion of a pilot for increasing outreach to older adults, especially people 65 years of age and older on a fixed income. "We have been working with a foundation, and if we are successful with the project, we will help our credit unions reach this population with better marketing, products, and services."
Another effort, centered around training people with disabilities for internships at CUs, is beginning to produce results. The Federation is also investigating a short-term alternative to payday loans for Federation credit unions and the broader CU industry, Rosenthal shared.