Matz Wants to Use Contingency Funds for Smaller CUs

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NCUA Board Member Debbie Matz is pushing a Small Credit Union Initiative that could be rolled out in 2005.

Matz wants to use some of the contingency funding for personnel that was included in NCUA's budget for 2005 that was recommended during an October public forum and which is to be adopted at NCUA's board meeting later this month.

"Without adding positions or dollars to the budget, this initiative would use existing resources and reallocate positions that have not been filled," said Matz. If approved, NCUA staff would need to write job descriptions and hire people to fill them.

According to Matz, the goal of the Small Credit Union Initiative would be to "assist small credit unions, which are at the forefront in serving people of modest means and are invaluable in preserving the tax exemption for all credit unions."

"To some key lawmakers, small credit unions are the icon of the credit union movement. Their disappearance could threaten the tax exemption for all credit unions," Matz said. "So in order to protect the safety and soundness of the entire system, it is time for NCUA to step up our efforts to assist small credit unions."

Matz said many small credit unions are struggling because they are located in low-income neighborhoods in which there are no other traditional financial institutions. She added that a coordinated effort across the agency could help more small credit unions survive and thrive.

Specifically, Matz is proposing:

* Two of five positions that were not filled after NCUA's regional realignment would be reallocated to NCUA's Office of Credit Union Development (OCUD).

* One position would coordinate training programs for small credit unions on vital issues such as board responsibilities, internal controls, recordkeeping, regulatory compliance, and the need to offer new services that can help small credit unions grow, Matz said, adding that a lack of training leads to credit union failures.

* The other position would focus on training of all NCUA examiners who work with small credit unions. The move would ensure consistency, she said.

In addition, NCUA's 15 Economic Development Specialists (EDSs), who are currently spread unevenly through the NCUA regions, would be centralized under OCUD. "Small credit unions require a more tutorial approach, and our EDSs are shining examples of the effectiveness of this strategy," Matz observed. "Credit unions receiving on-site assistance from EDSs are much more likely to remain viable. Centralizing the EDSs will make the program more efficient in reaching more of the credit unions that are most in need of assistance."

Matz noted that small credit unions represent nearly 50% of all credit unions, yet proportionately less examiner time-38%-is spent on these institutions.

"This includes work on mergers and liquidations," she said. "If that work is subtracted out, the time spent actually helping small credit unions stay in business is far less. We need to invest more resources, not less, in assisting small credit unions. Ultimately doing so would result in less time being spent on mergers and liquidations, and more time helping to preserve a stronger future for small credit unions and the entire credit union community."

In addition, Matz is further recommending that two of the positions could be reallocated to serve as Subject Matter Examiners (SMEs) in Specialized Lending. These SMEs would focus on examining indirect lending programs in regions where NCUA staff have identified particularly high indirect lending risks.

Matz also proposed that the final position could be reallocated to NCUA's Office of Corporate Credit Unions, in response to the report released last month by the Government Accountability Office, which suggested that OCCU will need greater resources to effectively examine corporate credit unions.

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