WASHINGTON-With their hands statutorily "tied," state regulators are mulling their options should the proposed Corporate Stabilization Plan's take effect and push scores of CUs under PCA.
"Obviously our priority is the impact [of the proposed plan] on credit unions," said Mary Martha Fortney, president of the National Association of State CU Supervisors. "It's a very delicate issue. It's complicated at best. Our priority is the same as that of the NCUA: the safety and soundness of credit unions." A big part of the debate, Fortney related, is how to account for the proposed assessment on natural-person credit unions to be used to "stabilize" the corporate credit union system.
State and federal regulators alike are working on guidance to be given to examiners in light of the proposed plan. The problem, however, goes well beyond making sure examiners are on the same page.
A primary concern among credit unions is that the assessment could make a big enough dent in their capital that they would come under the Prompt Corrective Action (PCA) rules - and that is something that cannot readily be changed. "The net worth requirements [under PCA] are in the statute, so the regulators' hands are tied," Fortney reminded, noting that any sort of change there would require an act of Congress. "There are efforts to see what, if any, consideration can be given [in the examination process]."
But details on what form that consideration could take are as sketchy as the details on what the real impact of the proposed plan will be on credit unions' net worth. "We haven't seen an accurate prediction of the impact," Fortney commented. "It's an issue that is still a moving target at this point."
And there's still another area of potential fallout that hasn't taken full shape, yet, either: the impact on the regulators themselves if there is a sudden increase in the number of credit unions that fall under PCA. Every credit union whose net worth ratio falls below 7% has to file a net worth restoration plan, for example, which would require review by a state regulatory agency.
