Who Is NCUA Protecting By Keeping CAMEL Inside Tent?
Who is NCUA protecting by banning a director who disclosed the credit union's CAMEL rating ("Board Member Barred From CUs For Disclosing CAMEL Rating," CU Journal Daily Briefing, March 28)? Why shouldn't the public know the CAMEL rating and associated problems in a credit union when the CEO is under consideration for an NCUA Board post? The public has a right to know.
Fundamentally NCUA has a habit of opposing transparency. Shining a light on problems is the best way to assure solving them. NCUA would benefit from disclosing CAMEL ratings. NCUA maintains that members own their credit union. Does it make sense that owners shouldn't know the CAMEL rating?
I might have a different opinion about disclosing CAMEL ratings if boards of directors did a better job of holding management accountable for making improvements. But the fact is that in most cases when a credit union is having problems, the board is part of the problem. Good governance requires members to act when the credit union is not performing. Members will only act when they have the information needed to act.
Sen. Moynihan wrote a great book on the problems with secrecy. Secrecy, the lack of transparency, tends to make problems worse. I encourage you to read his book. If CAMEL ratings were public knowledge, it would provide greater motivation for credit unions to improve their performance. Public CAMEL ratings would also make NCUA more accountable for their role as both regulator and insurer.
No Need To Fear A Run
It is a fallacy that disclosing CAMEL ratings will start a run on a CU. Members are insured up to $250,000 and the average member has deposits of about $10,000.
I think most CEOs and boards oppose disclosing CAMEL ratings and they hide behind the fallacy that disclosing the ratings would result in a run. CAMEL ratings don't change overnight. Disclosure of CAMEL ratings would allow a credit union to tell its story and still have time to address problems.
The cold facts are that CEOs, boards and NCUA would rather not have full disclosure because it is painful.
I'd rather have the pain of disclosure than pay elevated share insurance premiums for the all-too-frequent credit union failures. In almost every case of credit union failure, the problem continued unresolved for years. Members were not informed of the problems and boards and CEOs failed to make the needed changes. NCUA's Inspector General has documented the lack of prompt corrective action and the all too frequent failure of NCUA to deal with problem credit unions in an effective way.
Therefore, let's give members the information and let them decide whether the credit union leadership is doing their job. After all, the members are the owners. Or are they?
Henry Wirz is CEO of SAFE CU, North Highlands, Calif.