John Kutchey presented a general regulatory session during the first day of the three-day accounting conference and returned to the stage for the next-to-last session two days later to talk specifically about how new corporate regulations will affect natural person credit unions. Despite the late time slot, the last presentation was packed as was the earlier one.
Because many of the attendees are vendors who did not attend NCUA town hall meetings, much of the information presented was repeated from previous speaking engagements. However, Kutchey revealed new information as he addressed each question submitted by the audience.
Regarding the government's public-private investment program, which repackages, guarantees and sells off toxic securities, Kutchey said the NCUA has considered participation in the program.
"This PPIP program is something we've been batting around internally as a way to take these bad assets off the books," he said. "We haven't made a decision, but we have evaluated something that's similar to what the FDIC has done."
He also hinted that new corporate regulations might include a limit on how much each natural person member may deposit in each corporate. The cap is meant to limit risk for corporates because "if one big credit union failed, it could take a corporate and maybe other credit unions with it." However, he also said the limit is a governance issue.
"To be frank, some natural person credit unions are exerting an extreme level of influence on their corporate because of size of their deposits," he said.
The NCUA will also release new supervisory letters by early 2010 that will address earnings, concentration risk and member business lending.
Kutchey said he will instruct examiners to give credit unions some flexibility when it comes to evaluating revenue.
"The credit union might be unprofitable now, but examiners should look at the credit union's strategic plan, its ability to plan for future and other factors when rating earnings and income," he said.
The NCUA is continuing to increase its ranks, hiring more employees to send into the field and is also reallocating more internal staff to "problem resolution."
As of Sept. 30, 326 federally insured credit unions had a CAMEL 4 or 5 rating, and 66 of those have more than $100 million in assets. Kutchey said he doesn't expect the number of troubled credit unions to peak until next year and said losses will lag behind an economic recovery. "There's always about a four- to five-year tail to work losses through the system after a recession ends," he said.