CONSHOHOCKEN, Penn. — For years Decision Strategies International Senior Consultant Dr. Franck Schuurmans was certain that the credit union movement was over-capitalized, and the rule of thumb of 9% capital professed by former NCUA Chairman Dennis Dollar was too conservative.
But 2009 flipped his outlook considerably and made his position into quite the turkey. "I do believe that 'conservative is good' has made a big comeback since the recession and the financial crisis," he told Credit Union Journal. "Those credit unions that were well capitalized (10% plus) were often criticized, including by me, but today they look a lot smarter in this environment compared with those who hovered at the 7% range."
Prior to the crisis Schuurmans professed an ideal of 7% capital, and even less if Basel II standards were taken into account by NCUA. He is now signing at very different tune.
"Today 10%, in light of the many shoes that have dropped and more that likely will happen, seems a good position to have. (But) board and management foremost need to have a strategy related to their reserves position and understand why they believe they need to maintain that position. Fear alone cannot drive asset management strategy."
