NCUA Sends Point-By-Point Response On GAO Study

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NCUA has sent a response to the General Accounting Office in response to GAO's report on CU services to underserved markets (see related story, page 3).

The agency, which had 60 days to respond to the GAO report, responded in its nine-page letter to all five recommendations made by the General Accounting Office. Below are the five recommendations and a brief of the NCUA's response:

1. NCUA should use more tangible indicators, other than "potential membership," to determine whether credit unions have provided greater access to services in underserved areas.

Response: NCUA said GAO's proposal creates burdens that can't be cost-justified, but added that it would "carefully consider whether there are additional ways of using existing data to determine the success of CUs in providing greater access to service in underserved areas." NCUA also suggested the GAO used some flawed data.

2. GAO urged NCUA to consult more regularly with other regulators through the Federal Financial Institutions Examination Council regarding risk-focused programs to learn how these regulators have dealt with past challenges.

Response: NCUA noted it already works with FFIEC.

3. NCUA was urged to continue to make improvements in the criteria used for determining the overhead transfer rate (OTR), including being more consistent, updating the OTR annually, and recommendations made by the external auditor.

Response: The agency said it has been making changes and improvements to the OTR since 2002, including a refined OTR calculation introduced in November, 2003.

4. GAO called for research into risk-based pricing on NCUSIF premiums to better allocate costs to insured credit unions based on the relative risk they pose to the fund.

Response: NCUA stated that "risk-based pricing would require action by Congress to amend the Federal CU Act, which currently requires uniform pricing with respect to 1% deposit and insurance premium."

5. GAO recommended NCUA examine new ways of refining the method of calculating the NCUSIF's loss reserves.

Response: The agency said it remains in discussion with the FDIC on the issue of calculating reserves for insured institution losses. But it added that "there is merit to tailoring FDIC's method for use by NCUA in establishing the NCUSIF's loss reserve level."

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