Compliance Blog

Written by Carrie Hunt, General Counsel and VP of Regulatory Affairs

Yesterday, NCUA’s Chairman Debbie Matz and senior agency staff held a town hall webinar so as to update the industry on a variety of issues.  Below, in a question and answer format, are some items that NAFCU thought would be of particular interest to credit unions.  We will know more about a few of the items at the NCUA Board meeting next week.

Health of Industry

Question:  What are the indicators showing on the health of the credit union industry?

Answer:     The indicators are showing a slight improvement, although the industry is not out of the woods.  The number of CAMEL 1 and 2 credit unions have grown and the number of troubled credit unions has stabilized or slightly improved.  Net worth of credit unions is above 10%, which is higher than previously.  Lending has stayed steady over recent reporting periods, but member business lending has increased significantly.

Question:  With credit unions seeing increased deposits recently, what is NCUA doing to mitigate the impact on credit unions’ net worth capital ratio?

Answer:    NCUA has issued examination guidelines for examiners to provide credit unions with maximum flexibility in this area.  Further, NCUA does support supplemental capital for credit unions (if implemented into law), which will alleviate the pressure on net worth ratios.

Assessments

Question:  What are the estimated NCUSIF and corporate stabilization assessments for 2012, and should a credit union be accruing for the assessments?

Answer:     NCUA will not impose a NCUSIF premium for 2011 and, while the goal is the same for next year, the agency estimates 0 to 7 basis points in insurance premiums for 2012.  Further, the agency estimates between 8 and 11 basis points assessment for the corporate stabilization fund for 2012.  The remaining cost for the stabilization is between $1.8 billion and $6.1 billion for the life of the program.  It is NCUA’s position that credit unions should not be accruing for the projected assessment, but can budget for it. 

Corporate Credit Unions

Question:  What is the status of U.S. Central Bridge Corporate Credit Union and Wescorp Bridge Corporate Credit Union?

Answer:   Meetings with potential bidders have been held and NCUA has conducted due diligence of interested parties.  Bids have been received for both corporates (bids were due for US Central on October 28 and November 4 for Wescorp).  NCUA may signal winning bids by the end of November.

Question: Why did NCUA not solicit bids from non-corporates for Wescorp Bridge?

Answer:     It is NCUA’s goal to ensure that services to Wescorp members continue uninterrupted.   Further, NCUA has found that more synergies are likely to exist with existing corporates than with other parties.

Budget

Question: Will the NCUA’s budget for 2012 be higher?

Answer:    The budget is likely to increase by single digits, but the final number will be determined at the NCUA’s November 17, 2011 meeting.  Chairman Matz asserted that the $48 million increase in budget over the last 2 years has equaled to savings of about $ 1.5 billion in savings for credit unions, highlighting NCUA’s early intervention with large troubled credit unions.  

Question: Will all of NCUA’s staff salaries be frozen for 2012?

Answer:    The collective bargaining agreement that NCUA recently entered allows for pay freezes for employees covered by the agreement. 

Upcoming Regulations

Question:  What regulations has the agency been working on and when should the industry expect actions on such regulations.

Answer:     The agency expects to issue an Interpretive Ruling and Policy Statement (IRPS) on troubled debt restructuring that will apply to all loans, not just mortgage loans, in the near future.  NCUA is also working on a proposal rule regarding loan participations, which could include “skin in the game” requirements for sellers and standards for purchasing loans for buyers.  Proposals on derivatives, member business lending and calculation of a credit union’s risk-based net worth are also on the horizon. 

Examination Issues

 Question:  What is NCUA looking for in a credit union’s interest rate risk management?

Answer:     The historically low interest rate environment poses long-term interest rate risk for credit unions.  NCUA would like to see a credit union’s current balance sheet be able to absorb significant interest rate increases.

Question:  I have heard of a national supervision manual that NCUA is working on.  What is it and how will it impact examinations of my credit union?

Answer:     NCUA staff has been working on a national supervision manual, which is currently in draft stage, but the manual will only address issues that will impact examinations from the background perspective for NCUA itself and will not impact credit union examinations.

 

Tip:  When you watch an NCUA webinar pop open the caption option and you will get a running feed of what is being said.   You cannot save the text or even copy and paste it into a document, but it gives you a chance to go back over the webinar right after you have seen it if there is something you did not catch.  Plus, the mistakes in the automatic text can be pretty funny in a juvenile way.  From yesterday: “I have with me today many of our senior staff, and we are going to introduce them right now so you know who is in the room.  You will have the opportunity to ask Russians afterward.”