Matz Says Solving Corporate Woes Will Help Industry Turn Corner
WASHINGTON -- The NCUA's finalization of its revamped corporate credit union rules and plan for dealing with legacy assets will enable the industry to begin turning the corner on a "painstaking and frustrating period," Chairman Debbie Matz told attendees at NAFCU's Congressional Caucus.
She said the rule, which was scheduled to be released after press time, emphasizes "realism, rigor and responsibility." Matz added that it will strengthen capital requirements, limit the average life of assets to prevent liquidity risks, ban the purchase of private-label asset-backed securities and raise standards for board member requirements.
The rules won't include term limits, a change from the original proposal.
"The new corporate rules will also make it clear that consumer credit unions are empowered to make decisions about the future of the corporates. Taken together, the business judgments made by the nation's 7,500 consumer credit unions will shape the new corporate structure," Matz noted.
On legacy assets, she said there is "no easy way to unbundle about $50 billion worth of long-term assets." A main goal of the agency's plan is to "devise a way to safely deal with legacy assets at the lowest possible cost and consistent with sound public policy."
The NCUA Board is scheduled to hold a special meeting on Friday afternoon to deal with the corporate rule and legacy assets.
Once those issues are resolved the credit union system will be able to "break free from the burdens of the past and move into a brighter future," she added. She noted that the industry's intangible assets, such as its reputation and brand will help it grow in the years ahead.
In a separate speech, NCUA Board Member Gigi Hyland said the difficulties facing many credit unions should cause all credit unions to increase their due diligence and use sound and timely risk management practices.
She said her agency practiced risk management when levying premiums to shore up the NCUSIF and pay for the rescue of corporate credit unions.
"It's not practical to manage the fund without a reasonable margin of safety," she said.
The assessment for corporates reflects the fact that the problems facing that sector are the most significant challenge to the industry, she added.
NCUA Board Member Michael Fryzel told the group that by taking the best ideas of the past and new ideas, credit unions will have "a future better than their extraordinary past."
He urged attendees to take their "energy and confidence back from this place to your home communities."
He said the actions by his agency and credit unions will shape what credit unions look like in five, 10 and 20 years.
Fryzel told the audience that they are the "vanguard of hope."