FEDERAL WAY, Wash. - Regulatory overreach or acting within its rulemaking authority as overseer of the National Credit Union Share Insurance Fund? These are some of the questions a group of 11 state leagues from the Northwest and Pacific coast areas hope to be able to answer by the time they complete a jointly funded study looking into the increased scope and scale of NCUA mandates regarding the NCUSIF. The action by the Member Services Group-as the 11 leagues refer to themselves-is in response to increased concerns by credit union leagues and state regulators over possible regulatory overreach by the agency into the affairs of state-chartered credit unions. The 11 leagues making up the group are: California, Colorado, Idaho, Montana, Nevada, North Dakota, South Dakota, Oregon, Utah, Washington and Wyoming. It's the latest study commissioned by the eight-year old association chaired by Herb Walberg, CEO of the Montana Credit Union Network. Two years ago, Member Services Group commissioned an outside consultant to conduct an insurance study of CUNA Mutual Group out of concern that some leagues were receiving different percents of premiums during a year. As a result of that study, CUNA Mutual completely restructured its marketing arrangements with all state CU leagues and all leagues receive 1.45% of premiums generated in a given year. "NCUA may be placing restrictions on state-chartered credit unions to protect the NCUSIF," Walberg told Credit Union Times, John Annaloro, president/CEO of the Washington Credit Union League said that discussions among state-chartered credit unions and regulators on the issue are not new, they've been going on for years. "Some CUs have called the NCUA's actions a preemption of states' rights, but preemption isn't the only issue. When the NCUSIF was established (in 1970) and NCUA was charged with overseeing the safety and soundness of the funds, that wasn't meant to be at the expense of all credit unions looking the same." Specifically, the study will attempt to answer four questions: What authority was NCUA given when the NCUSIF was set up? What should NCUA do in a best case scenario? What have they done that's causing the problem? Has NCUA overstepped its regulatory authority? It's the leagues' position that NCUA regulations should govern state-chartered, federally insured credit unions only to the extent that those regulations protect the safety and soundness of the NCUSIF. "State-chartered credit union regulations beyond this are outside of NCUA authority, they pose no threat to the NCUSIF," said Annaloro. It's no coincidence that the timing of the undertaking coincides with another initiative being undertaken by some state-chartered credit unions concerning rethinking and possibly coming up with an alternative to the NCUSIF in the form of a national private insurance fund (CU Times, June 14.) If state-chartered credit unions were not faced with the many changes that are coming about in the credit union community, it might have been business as usual for them, offered NASCUS President Doug Duerr. But that's not the case. "In my conversations with state-chartered credit union CEOs and directors, I'm increasingly hearing them use terms like `business decisions'," Duerr said. "State-chartered credit unions are being put into situations where they have to evaluate the long term implications of their business decisions. That's forcing them to focus more on peripheral items affecting those decisions such as the cost of share insurance. "State-chartered credit unions always knew there were differences between themselves and federal credit unions, but they accepted those differences more as being philosophical. Now when they have to make strategic decisions and implement five-year plans on how they are going to survive and serve their members, they're looking at where the opportunities are and where they're not. They're examining themselves more carefully. And when they look at their long term plans, they inevitably examine their expenses and they see that they're spending an inordinate amount of money insuring their shares. "No matter how you look at it, the credit union community is funding the NCUSIF," said Duerr. Annaloro stressed that the Member Services Group's efforts are not meant to be a `leagues versus NCUA' situation. "We are interested in doing things the right way, but some things may have to be changed to get to that point," he said. The review of the NCUSIF is meant to start the questioning process. Depending on what the study turns up, it may be the legal basis of claims by several state-chartered credit unions in the 11 states, "and the action course to restore the self-determination inherent in the promise of the dual chartering concept," said Annaloro. "It's possible to do things differently without taking on additional risk," he commented. "It's possible to have supervision and oversight shared equally between a federal agency and state regulatory agencies." Walberg stressed that "a lawsuit is not the intent of the study. We want the agency to be aware of the issue and take steps to remedy it." -
ekingoff@cutimes.com
