NCUA Applauds GAO Report
The U.S. Government Accountability Office on Wednesday issued its report on corporate credit unions and the NCUA, where the title tells the story: “Earlier Actions Are Needed to Better Address Troubled Credit Unions.”
Called for in the NationalCreditUnionAuthorityClarificationActof 2011, the GAO report examined the whys of the collapse of multiple corporate credit unions and what the NCUA might have done differently.
The key opinion in the GAO document: “GAO found poor investment and business strategies contributed to the corporate failures. Specifically, the failed corporates over-concentrated their investments in private-label, mortgage-backed securities (MBS) and invested substantially more in private-label MBS than corporates that did not fail. GAO also found that poor management was the primary reason the 85 [natural person] credit unions failed. In addition, NCUA’s Office of Inspector General has reported that NCUA’s examination and enforcement processes did not result in strong and timely actions to avert the failure of these institutions.”
The report continued: “GAO’s analysis of PCA[Prompt Corrective Action] and other NCUA enforcement actions highlights opportunities for improvement.”
The GAO concludes by offering two recommendations for action:
* “To better ensure that NCUA determines accurate losses incurred from Jan. 1, 2008, to June 30, 2011, we recommend that the Chairman of NCUA provide its OIG the necessary supporting documentation to enable the OIG to verify the total losses incurred as soon as practicable.”
* “To improve the effectiveness of the PCA framework, we recommend that the Chairman of NCUA consider additional triggers that would require early and forceful regulatory actions, including the indicators identified in this report. In considering these actions, the Chairman should make recommendations to Congress on how to modify PCA for credit unions, and if appropriate, for corporates.”
For its part, the NCUA, in a statement, applauded the GAO report and recommendations.
“We welcomed the GAO review, and NCUA fully agrees with the recommendations contained in the GAO report,” said NCUA Board Chairman Debbie Matz. “In fact, we were already working to implement these recommendations. With completion of the 2010 Corporate Stabilization Fund audit last week, NCUA has complied with the first GAO recommendation and will continue to regularly update cost estimates in the future. To fulfill GAO’s second recommendation, we will continue to implement strategies to improve NCUA’s early detection methods and strengthen enforcement actions where necessary.”