Small CUs, Big Concerns

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NEW YORK — The National Federation of Community Development Credit Unions continues to be troubled over NCUA's regulation of small CUs.

Federation President Cliff Rosenthal told Credit Union Journal that he is concerned that small and community development CUs are not receiving necessary consideration from examiners due to the fact they often operate on thinner margins, have a different structure, and that NCUA's field team is not adequately understanding or paying attention to their special needs.

"Like the rest of the movement, there has been widespread dissatisfaction," Rosenthal said. "There is resignation at best, and more than that, there continues to be discontent among our members on this."

As an example of the pressure NCUA is placing on small credit unions, Rosenthal shared that a CU under $1 million in assets with more than 25% net worth made the Federation aware that NCUA is pressuring it to merge. "Now what do you make of that?"

Rosenthal questioned whether the problem is a lack of examiner skill, lack of attention to NCUA guidance on examining small credit unions, or a lack of focus on where the true risk to the NCUSIF lies. "I don't know if NCUA is attuned to the level and pattern of material risk. How do you make sense of the fact our small credit unions report such extreme pressure from examiners when they represent for the most part a miniscule risk to share insurance fund?"

Rosenthal added the pressure small CUs are feeling is a direct result of NCUA being overly aggressive in evaluating loan portfolios and increasing the allowance for loan losses "beyond what is justified. That barn door is being so hammered and cemented shut that perhaps the real hot spots and dangers are not receiving adequate and proper attention."

Rosenthal noted that NCUA's performance around the Treasury Department's Community Development Capital Initiative was "exceptionally good and greatly appreciated" by the Federation.

Another source, requesting anonymity, offered another perspective, insisting a big reason small credit unions are receiving increased NCUA pressure is because they do not possess the resources of larger credit unions. "They do not have the on-staff attorneys or internal audit staff to fight back. They are easier for NCUA to push around and are easily manipulated into merger."

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