I was very happy to see both Chip Filson and Jim Blaine support the release of CAMEL ratings (CU Times, Jan. 25, page 1).
I have long supported the release of examination ratings and the findings behind those ratings for all credit unions. The credit union system relies on member ownership. The members elect the board of directors to protect their ownership interest in the credit union. Member owners must have actionable data to hold the board accountable. Members need to know the health of their credit union. The many recent corporate and natural person failures point to the need for more member oversight. Annual meetings and audit financials are not enough. Members should see the ratings and the findings behind those ratings.
NCUA’s Region III Director Herbert S. Yolles has informed North Carolina credit unions that their state regulator, North Carolina Credit Union Division, violated NCUA rules by authorizing the release of the state-issued credit union rating. Yolles states that the release of the state-issued ratings is contrary to the interests of credit unions and contrary to the interests of the insurance fund.
I disagree completely. The release of examination ratings and the findings that support those examinations are critical information that member owners should have. Does Yolles believe that owners of the credit union are not entitled to know whether the board and management are running a safe and sound credit union? The NCUA has so far been content to wait until the credit union has failed to inform members that the credit union had inadequate capital, impaired assets, weak management, weak earnings or insufficient liquidity.
Every credit union in the country knows what that is like. My credit union only found out that our corporate was in trouble after it failed, and we lost our capital. That was the extent of NCUA’s prompt and corrective action. I maintain we would have been far better off had the NCUA released examination ratings and findings for all of the corporates after they presented them to the corporate boards.
Yolles may be concerned that releasing examination ratings and CAMEL ratings might say as much about the NCUA’s performance, or lack thereof, as that of the credit union. In fact, that is what the NCUA Inspector General’s reports imply and what the GAO report implies and what the KPMG audit of the stabilization fund implies.
I call for all credit unions to support the release of CAMEL ratings and exam findings, at least in a form similar to the management letter a CPA would give to the board. No business owner should be in the dark about how well their business is managed. Transparency will make credit unions better, and it will make the NCUA a better regulator. Our members should not have to wait until the credit union fails to find out something is wrong.
SAFE Credit Union
North Highlands, Calif.