NCUA Unveils New Exam Office
NASHVILLE, Tenn. — NCUA resources are being disproportionately applied to small credit unions and skimping on large credit union supervision, NCUA Chairman Debbie Matz told NAFCU’s annual conference attendees during her general session address July 24
As a result, effective Jan. 1, 2013, NCUA’s Office of Corporate Credit Unions will reorganize into a new Office of National Examinations and Supervision that will supervise all corporates as well as natural person credit unions with more than $10 billion in assets.
Current Director of Corporate Credit Unions Scott Hunt will lead the new office, Matz told Credit Union Times, and will bring his existing staff with him. The Office of Examination and Insurance, led by Director Larry Fazio, will provide twice-annual quality control reviews of the new office’s examinations, she said.
In addition to the supervisory mismatch, the three largest credit unions are each larger than the entire National Credit Union Share Insurance Fund, which has $11.6 billion in assets as of May 31. As a result, Matz said, if one of those credit unions “got into trouble, we couldn’t afford to rescue it.”
Natural personal credit unions that will be supervised by the new office include the $48 billion Navy Federal Credit Union, the $25 billion State Employees’ Credit Union, the $15 billion Pentagon Federal Credit Union and the $10.6 billion Boeing Employees Credit Union. Matz said the $9.5 billion SchoolsFirst Federal Credit Union is close to joining the other four credit union giants above the $10 billion mark.
The move has been in the works for about two years, Matz said. The idea came out of a systemic risk working group that put together options to improve safety and soundness, which met with NCUA executives twice to make the final decision.
The new office is expected to be budget neutral.
“We wanted to find a solution that would be both efficient and effective,” she said, adding, “we didn’t want to add any additional resources or staff.”
The reorganization was also prompted by the reduction in the number of corporate credit unions in the past few years, she said.
Affected credit unions won’t likely see any changes to their current examination regimen until 2014, Matz said, because the NCUA will spend 2013 making the internal transition and training staff. Director Hunt, who has experience examining natural person credit unions, “brings so much” to the new office “because he has expertise on both sides” of retail and wholesale credit unions, Matz said.
Matz also announced that the NCUA will reconsider the $10 million threshold that currently defines small credit unions, which are exempt from many regulations and eligible for assistance from the Office of Small Credit Union Initiatives.
The regulator said in a recent letter to credit unions that those with fewer than $10 million in assets will from now on only be subjected to a 40-hour examination. Matz said if the small credit union threshold is raised, credit unions over $10 million may not get the 40-hour exam but will benefit from other regulatory burden-busters.
The agency is currently conducting analysis to determine the new threshold size and expects to roll out the recommendation in time for the September board meeting, Matz said.
Regardless of whether more credit unions will fall under the OSCUI’s umbrella, Matz said the office is working to reach a wider audience by utilizing technology such as webinars, DVDs and phone calls. The goal is to reduce the time examiners currently spend assisting small credit unions, which is partly to blame for the disproportionate amount of resources spent on the small end of the asset spectrum.
During her address, Matz said the board will also reconsider a number of regulations this fall that credit unions voiced objections to during recent NCUA Listening Sessions. They include the potential to count video teller machines as service facilities in meeting field of membership expansion requirements, dropping the personal guarantee for member business loans in certain cases, allowing credit unions to purchase Treasury Inflation Protected Securities, increasing the maximum application fee for short-term loans and expanding the definition of districts for credit unions that serve rural areas.