Leaving The Movement Better Than We Found It
As my tenure at NCUA nears its end after having served over six years on the board and three of those years as chairman, I am convinced that we have brought the agency into the 21st century with significant and substantial modernization initiatives that can be felt in every area of NCUA regulation, supervision and agency management.
The NCUA board's actions during recent years have strengthened the safety and soundness position of America's credit unions to its strongest level in history, improved the effectiveness of the agency's budget and management oversight structure to a level of respect we could only have imagined six years ago and, at the same time, created a credit union regulatory environment that unapologetically emphasizes safety and soundness, but also provides within those parameters an incentive-based system for well-managed and financially strong credit unions to be able to make their own business decisions without the unnecessary regulatory burden often found in a "one- size-fits-all" regulatory approach.
I have been asked several times in recent months to select a particular issue or accomplishment while serving at NCUA as the most "far reaching." While being honored that some of my initiatives are being viewed as sufficiently visionary for some to call them "far reaching," it is impossible for me to rate the many significant issues addressed in recent years as if we were voting on the AP Top Twenty during college football season. I am not objective enough to do so.
However, recognizing in advance that I will miss some of NCUA's most significant actions in the minds of some observers, I will attempt to discuss some of the accomplishments during my tenure that I feel have the potential to be among the most "far reaching" as credit unions move into the future as a part of a dynamic financial marketplace.
Taking AIM At Accountability
Within the agency, our Accountability in Management initiative (better known as AIM) produced incredible results that have made NCUA a more effective and efficient organization. Staffing levels have been reduced by 65 positions over three years resulting in greater efficiency without costly buyouts and forced retirements, six central office departments have been consolidated into a much leaner three, one regional office was closed, another regional office was relocated to a lower-cost area and technological advancements are saving millions a year through video conferencing, communications enhancements, updated computers and other initiatives.
As a part of the AIM emphasis on greater agency efficiency and accountability to its stakeholders, NCUA has now for three consecutive years made history by conducting its first-ever annual Budget Briefings and Public Forums. Through AIM, the credit unions who pay the bills at NCUA have seen greater transparency and increased emphasis on accountability to our stakeholders in NCUA's budget process. Operating fees for federal credit unions have decreased over 10% during this three year period and the overhead transfer rate has been reduced twice from a high of 66.72% to its present 59.8% (the only times in history that the OTR has been reduced).
As we look outward to the credit union community as a whole, the greatest success over recent years has been their increasingly strong financial position. America's federally insured credit unions are safer and sounder than at any time in their history, with over 82-million members, a net worth ratio at 10.72%, total shares over a half-trillion dollars, delinquency and charge-offs at historic lows, and fewer troubled credit unions than at any time in more than forty years. Safety and soundness is the most important member service that can be provided by any financial institution, and credit unions are performing at their highest safety and soundness position ever.
In the arena of outreach, the success of NCUA's Access Across America initiative has been impressive, resulting in more than 558 federal credit unions nationwide adopting 975 underserved areas into their FOMs over the last three years. These credit unions have extended access to lower-cost financial services to 64.7 million Americans living in underserved neighborhoods that three years ago did not have the option of joining a credit union as an alternative to the payday lenders and title loan companies proliferating in their communities.
Probably the issue with which I became identified earliest in my term was RegFlex. This earned regulatory flexibility initiative is now nearly three years old and has resulted in more than 3,600 well-capitalized federal credit unions with solid CAMEL ratings having earned enhanced empowerment options to make certain specified business decisions which were previously prohibited by one-size-fits-all regulation. The RegFlex criteria has been applied in other subsequent regulations as well, including the 2003 re-write of NCUA's investment regulations. I believe RegFlex proved that earned flexibility can be incorporated into the regulatory process without sacrificing safety and soundness. In fact, I would submit that the incentive for stronger management and financial performance inherent in qualifying for RegFlex may make it one of the most positive inducements for safer and sounder credit unions in recent NCUA history.
Despite the criticism by some marketplace competitors who do not want to see credit union safety and soundness enhanced through greater diversification opportunities, the NCUA board has taken the necessary and courageous step of updating the field of membership (FOM) rules for federal credit unions. This incremental modernization of FOM rules has been accomplished, as was held by decisive court decisions at both the district court and circuit court of appeals when the rules were challenged, within the parameters established by Congress in the Credit Union Membership Access Act of 1998. But, even more importantly since we have lost more credit unions over the course of history due to a lack of diversification in their membership than for any other reason, the FOM updates provided reasonable options for the diversification necessary for credit unions to remain viable in today's changing financial marketplace. The modernized FOM rules were not only a victory from a diversification perspective, but they will also serve to allow the extension of lower-cost financial services to literally millions of Americans of modest means who might otherwise be left with few, if any, lower cost options than the local pawnshop or rent-to-own outlet.
The revised member business lending rules approved in 2003 have the potential to extend availability of entrepreneurial start-up capital to thousands of credit union members who need it to fulfill their career dreams of owning a small business. From a financial stability perspective, with auto lending growth being challenged by low-rate dealer financing and mortgage rates beginning to tick upward, the opportunity for qualified credit unions to diversify their loan portfolios into well-balanced small business lending will be very positive.
Also Worthy of Mention
Other significant achievements at NCUA in recent years worthy of honorable mention are our successful implementation of a risk-focused examination program, modernization of the corporate credit union regulations, establishing workable and safe parameters for overseas branching, and a modernized but still appropriately conservative investment regulation for federal credit unions.
Credit unions and NCUA are both better positioned for a bright and productive future than they were six years ago. When the best we can hope for from our assignments in life is "to leave the place a little better than we found it," I am convinced that we have done so at NCUA. History will judge how much better, but I believe our record will stand history's scrutiny well.
Dennis Dollar is chairman of the National credit Union Administration.