'Intrusive' Regulator A Result Of Meltdown
SAN ANTONIO-Credit unions and their trade groups say their federal regulatory agency is over-reaching and "intruding."
During a panel discussion at America's Credit Union Conference here, Mary Dunn, CUNA's SVP and deputy general counsel, said the core problem is that NCUA, having seen losses at failed natural-person and corporate CUs, does not want to see that scenario repeated. "So, NCUA is intruding into credit union operations. We need to work with the regulator to make sure it does the right thing."
Eric Richard, EVP and general counsel, asked members of the panel if it was fair to say-as some in some in the credit union community have-that NCUA is trying to "put CUs out of business?"
Dunn responded no, but added, "We have a situation where NCUA is being aggressive. It sees problems at one credit union, then rushes to regulate other credit unions in the same way, even though the problem might be unlikely to happen at all credit unions in the say way."
What CUNA is asking NCUA to do, Dunn continued, is to not "interfere" with the entire CU system. "The regulator wants to eliminate risk. But we want a system where credit union managers can manage risk," she said to vigorous applause from the audience.
Bill Hampel, SVP of research and chief economist for CUNA, said prior to the recession 99% of credit unions were rated as "well capitalized." Today, that figure is 94%.
"NCUA sees a huge increase from a tiny number of troubled credit unions and thinks it has to respond," he said. "It is a small and still manageable number, but NCUA thinks the world is ending."
Ryan Donovan, VP of legislative affairs, reminded CUs the regulator has to answer to lawmakers in Washington, D.C., and sometimes politicians want to know why the failure numbers are up.
"The role of Congress is wanting the share insurance fund to be well-managed and healthy, and credit unions to be healthy," he said. "What they don't always see is there is a cumulative effect of the regulatory burden on credit unions, especially where some regulations are arbitrary or capricious. But the bottom line is, Congress wants the regulator to do its job."
Change In Congress
CUNA President and CEO Bill Cheney noted there has been a change of leadership in the House of Representatives from Democrat to Republican in the last general election has brought a "new attitude" to the House Financial Services Committee.
"There is a concern that the regulator is substituting its judgment for that of credit union managers," Cheney said.
Hampel followed by saying 350 banks have failed compared to 50 CUs in recent years. The small number of credit union failures is not necessarily because of NCUA, he said.
"Credit unions went into the financial crisis with less risk exposure than banks," he explained. "There is some conflicting evidence of what is happening to banks. Some say the FDIC is more understanding than NCUA, but others say the FDIC is too quick on the trigger."
The big question to ask, offered Dunn, is: "Is our regulator doing right by us?" She said the lowest marks NCUA receives from credit unions are for the way it deals with CUs on the examination level.
The next issue to come down on CUs probably will be interest rate risk. Dunn said NCUA has proposed for credit unions to have an interest rate risk policy in place. "CUNA is worried that the detailed appendix on this new regulation will become a checklist for examiners," she said. "If credit unions don't meet the requirements, they risk losing their share insurance coverage, so we are opposing this quite strongly."
Because of the recovering economy, Hampel said the NCUSIF premium is a "thing of the past," at least for now. He expects the corporate stabilization assessment to be 25 basis points this year.