ALEXANDRIA, Va. — As NCUA prepares to release new regulations governing corporate credit unions later this month, the cooperative movement as a whole found broad consensus on investment and capital requirements while still somewhat divided on the system's structure.
Many letter-writers at natural-person CUs called for major changes while others called on the regulator to leave the system alone. A dozen CUs that make up the "Corporate Credit Union Stabilization Partnership" called for "massive consolidation in the corporate system," dictated specifically by NCUA, and further suggested that the current services provided by corporates be divided among different providers. Their proposal recommends corporates be limited to providing short-term investments and liquidity; that brokers provide long-term investments and that CUSOs be used to facilitate long-term liquidity with participations and securitizations.
But views such as those George Berry and Terry West, the chairman and CEO of VyStar CU in Jacksonville, Fla., respectively, were more numerous. "We believe corporate credit unions themselves will, over time, determine the most appropriate number of corporate credit unions through consolidation, with the need for NCUA or the credit union movement to dictate the exact number," they wrote in an April letter. West was co-chairman of a joint CUNA/NAFCU task force that also made a series of recommendations on corporates to NCUA.
The move to a risk-weighted capital system and more stringent investment diversification requirements will likely be well received by the industry as most letter-writers agreed on the need for tighter regulation in those areas.
"In our view, the current capital system for corporates is insensitive to the underlying risks and fails to properly align capital retention at the corporate with the risk being assumed by each individual corporate credit union. Because of this, there is less incentive for corporate credit unions to engage in risk reducing activities," Gary Irvin, President/CEO of Indianapolis-based FORUM Credit Union wrote in March. "While the capital requirements set forth in the international Basel accords may not be appropriate for corporate credit unions in their entirety, we strongly believe that the stated principles and objectives of Basel to create uniformity and a set of best practices in risk management provides an excellent framework for NCUA to consider."
While there were a few voices calling for additional transparency on the part of the corporates, the focus of those comments was generally on investments and the financial health of the institutions; on the topic of executive compensation the industry was more or less silent.
