Matz: A Need To 'Connect The Dots'

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ALEXANDRIA, Va. — As credit unions continue to sound off about NCUA's growing budget and other regulatory issues, NCUA Chairman Debbie Matz defended the need for investing in a better, stronger agency.

"Our early warning system, the examination process, played a role in minimizing the damage. When we hear complaints about increasing the size of our staff and [shortening] the exam cycle, people are not connecting the dots," Matz told Credit Union Journal. "When we keep credit unions from failing, that keeps costs down for credit unions. I wish people knew how hard our staff works to preserve credit unions."

Moreover, the need to hire more examiners and return to a schedule of annual exams is the result of previous decisions, such as the Reg-Flex plan championed by former Chairman Dennis Dollar, that may well have been popular but ended up hurting the industry, she said.

"I believe it was a serious mistake to go to an 18-month exam cycle. It was a serious mistake to cut [NCUA's] full-time employees, and we're making up for it now. I'm not defensive about the budget. It's an honest budget. It's not padded, there is nothing frivolous in there."

Matz's latter comment is a reference to one criticism by some within the credit union community of "frivolous" line items in the budget, such as more than $1 million for rehabbing the bathrooms at the agency's headquarters. But Matz noted this isn't about upgrading from marble to granite: the bathrooms do not comply with the Americans with Disabilities Act.

A much larger issue over which credit unions have been particularly bitter is the 5% to 8% pay raises for some NCUA staff. Matz reiterated that the increase is part of a union contract that was negotiated some time ago, and that NCUA is required to honor that contract-which is also nearing the end of its term. Other agency staff have had their salaries capped by a federal pay freeze.

Meanwhile, many in credit unions have expressed fear of reprisal if they complain about their examiner or NCUA in general, but Matz said she just doesn't understand the foundation for that fear. "When I'm told of a situation like that [inconsistent exams, examiners inconsistencies with statements made by NCUA board members, etc.], but when I ask for specific examples, they won't tell me. I recognize they fear retaliation, but we cannot address it if we don't know where the problem is." Moreover, Matz said, for an examiner to somehow retaliate would require supervisors at multiple levels to conspire. "I just can't imagine it happening."

But that's not to say Matz can't imagine or understand the anger and bitterness felt by some credit unions.

"There's always going to be some natural tension between the regulator and the regulated-if it's not there, something is wrong. I understand [credit unions'] anger; that doesn't influence me to change the direction of the agency."

Despite the troubling financials-and the very real shock and dismay Matz said she felt when she was sworn in as the new chairman and saw the lengthy list of credit unions in peril-the NCUA chair wanted to point out that "the majority of credit unions are doing quite well-98% are at 6% [capital] or higher.

Though some have criticized the technical amendments to the Dodd-Frank Act that NCUA requested and won, Matz insisted the amendments are a very good thing for credit unions, particularly that allowing the agency to obtain funds directly from credit unions, rather than borrowing from the Treasury, as it means the agency-and therefore credit unions-won't have to pay all that interest to Treasury.

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