Debbie Matz' abrupt decision to step down as head of the National Credit Union Administration will leave some unfinished business of special interest to bankers.
Matz, who has chaired the NCUA board for more than six years, announced March 9 that she will leave the governing body at the end of April. As a result, several key initiatives, including a plan to ease credit unions' access to supplemental capital, seem likely to be placed on hold.
For bankers, anything that crimps plans to let credit unions access more capital comes as welcome relief.
The American Bankers Association is holding out hope that the next NCUA chairman will rethink the matter, John Hall, a spokesman for the trade group, said. "We hope this opens the door for an NCUA chairman who will provide rigorous oversight rather than acting as a cheerleader for the industry they're charged with supervising," he said.
Matz had taken great interest in supplemental capital, setting up a working group in late 2014 to study the issue. In October, after approving a hotly debated rule establishing a risk-based capital ratio, the three-member NCUA board pledged to follow up with a proposal to give credit unions capital options beyond retained earnings.
It is highly unlikely that an issue as controversial as supplemental capital will advance as long as a vacancy exists on the board, Geoff Bacino, a principal at consulting firm Bacino and Associates who briefly served on the NCUA board, said.
"Any time you leave a two-person board, the danger of gridlock is significant," Bacino said, noting that the full NCUA board had frequently struggled to reach consensus.
The current board has had some testy moments, including last month with Matz and Vice Chairman Rick Metsger clashed repeatedly with J. Mark McWatters prior to voting on a revision to rules governing member business lending. In the end, however, the three board members voted to approve the plan.
"Even the easy votes are getting hard," Bacino said.
It could take some time before Matz is replaced, industry observers said. A White House spokesperson did not respond to an inquiry about when a successor would be nominated.
Dennis Dollar, who chaired the NCUA board from 2001 to 2004, said he does not expect to see a replacement named until after the presidential election. "I think it is very unlikely that a … nominee will be brought forward by President Obama and confirmed during this contentious presidential election year with the Senate controlled by the opposition party," he wrote in an email.
Matz isn't the only board member set to leave. President Obama in January nominated McWatters to serve on the board of the Export-Import Bank, though he is expected to stay on the NCUA until his new post is confirmed by the Senate.
Risk-based capital was intended as a tool to push credit unions with riskier business plans to hold more capital. The plan was opposed by the major credit union trade associations, as well as hundreds of credit union executives, in large part because credit unions can only build capital through retained earnings.
Current law stipulates that only net income can be used to calculate a credit union's net worth, but the NCUA has the authority to let institutions tap other sources to meet risk-based capital requirements.
A number of comment letters urged board members to include a supplemental capital proposal within the risk-based capital rule. The board chose ultimately not to do so, though members declared their intent to revisit the matter before risk-based capital implementation in 2018.
The NCUA has declared its support for a bill, introduced in the House of Representatives by Brad Sherman, D-Calif., and Peter King, R-N.Y., that would allow credit unions to include some forms of supplemental capital in calculating net worth, but the bill has not cleared the Financial Services Committee.
Matz was first nominated to the NCUA board by President George W. Bush and served on the board from 2002 to 2005. She later returned to the board in 2009, when President Obama appointed her to be chairman. Her current term ended last year. Dollar, who also served several months as a holdover chairman, said Matz may have wearied of the speculation inherent in such a position.
"You work hard not to be a lame duck, but it becomes tougher and tougher to control the agenda when everyone knows your time is limited," Dollar said. "I understand her thinking."
Dollar and Bacino said Matz would be a tough act to follow.
"It's a big honor to be selected [to serve on the board] and an even bigger honor to be selected twice," Bacino said. "It speaks well to her political abilities and her ability to get things done."
"Her legacy is sound, and she doesn't need to stay a few more months to solidify it," Dollar said.