ALEXANDRIA, Va. -- NCUA Board Member Gigi Hyland echoes theagency's recent guidance on ROA. In fact in today's economicclimate, a lower ROA may reflect the credit union is doing all itcan to offer members more. Hyland also hopes credit unions continueto reach out to the small business market. Credit unions have beenserving businesses for years and need to partner with the SBA andothers to continue to do so. Hyland, who has been out and about alot in the industry, recently hosted an SBA Webinar. The Webinarcovered the basics of SBA lending and NCUA's approach to examiningcredit unions doing SBA lending. Credit Union Times offers thefollowing Q&A with Hyland to see what's on her agenda goingforward: CU Times: What is the importance of the ROA guidance thatNCUA sent out? Are there concerns there, either with the NCUAexaminers or with credit unions? Hyland: I wouldn't express it as aconcern...I think credit unions really needed some guidance fromNCUA and look into NCUA's head, if you will, on examiners and theguidance we're giving examiners to evaluate credit unions'earnings...In the current environment that we're in, a 1% ROA isvery difficult to achieve. From a safety and soundness perspective,it really doesn't necessarily rise to the level of safety andsoundness, but you have to ask, "in looking at the currentenvironment, is that board able to strategically position itself toleverage the capital that the credit union may have built to againprovide the services that the members really need and want."...Infact, 50 basis points earnings, using capital and a CAMEL 2 is nota bad place to be. Matter of fact that might actually be a betterscorecard and evidence that the credit union is really doing all itcan to provide products and services to its members. CU Times: Iwould assume the agency has to draw a line where this is propermanagement and this credit union's earnings are just dropping andthey can't fix it. Hyland: The NCUA has a risk-focused exam and weleave it to each individual examiner to create an exam for aparticular credit union that's appropriate for the risk that thatparticular credit union has undertaken. So the examiner has a greatdeal of flexibility--rightly so--to evaluate the credit union'sability to navigate these very difficult waters that we're in as afinancial services industry. CU Times: You've mentioned you wantedto discuss strategic planning. What angle are you coming fromthere? Hyland: Strategic planning really from the perspective of[credit union boards] looking into the future and looking at whatthey want their credit union to be not just a year from now, butthree, five, ten years from now? And are they positioning thecredit union appropriately to achieve those goals? It's as simpleas that. CU Times: Also tying into that is staffing and the boards.There's been talk among credit unions as well as the agency thatthe executives are "graying" and the boards are "graying." How doesthat all tie in? Hyland: I think it all ties in together...I thinkcredit unions really need to step back and look long and hard atthe existing fields of membership that they have and really explorewhether they've done all that they can to reach out to thosedifferent segments. The value proposition for one member may bevery different from the value proposition for another memberwhether you divide that by age, whether you divide that byethnicity, whether even by geography potential. Credit unions needto be aware of that and find a way to be responsive to all of thosemembers needs and meet the members where they are in theirparticular segment of their life...Credit unions I think areuniquely positioned to be able to do that, but it takes work. Ittakes strategic planning. It takes stepping back and looking atyour membership to figure out what those needs are and meetingthose needs. CU Times: You've also been interested in datasecurity. Are there any new NCUA regs on the horizon or any helpthe agency might be offering? Hyland: There's a requirement that'sgoing to go into effect at the end of this year that's going torequire multi-factor authentication. There are a couple differentletters to credit unions that have been issued...which reallyprovide guidance to credit unions on how they need to complete arisk assessment for Internet-based products and services to figureout whether those particular products and services really arehigh-risk transactions and if they are how the credit union shouldfigure out adding additional control mechanisms to what theyalready may have, like a single factor authentication. CU Times: Inthat most recent letter you mentioned, the agencies said they'renot going to back down as far as the compliance date. I'm alsohearing from a lot of credit unions that they are having difficultypossibly meeting that deadline, partially because some vendors maynot be ready for it. Are there going to be any kind ofconsiderations given? Hyland: As the date comes and as examinersstart going into the field, again, examiners will have thediscretion to really look to see how a credit union is doing. Thebest defense is a good offense for credit unions to the extent thatcredit unions have done a good job of documenting their efforts todate. I think that's critical and crucial in really showingexaminers the progress that has been made to comply with this newrequirement. I think that credit unions have to do the best thatthey can. Obviously, there's a compliance date that's looming andcredit unions need to be good at documenting their efforts andshould really strive to do that. CU Times: How do you view datasecurity from the safety and soundness point of view as well?Hyland: As you can see from those letters, a lot of times the NCUAshares the opinion of the other FFIEC agencies which fortransactions that are high-risk transactions on the Internet, asingle factor authentication is really not a sufficient controlmechanism to authenticate members because of the continuingevolution of fraud, of different types of viruses, of differenttypes of ways for fraudsters to mimic financial institutions' Websites. CU Times: What is the importance of credit unions' authorityto be able to make business loans? Hyland: Member business lending,if you look traditionally at credit unions, has really been asignificant part of credit unions, certainly back in the 1800s inEngland and Germany. That really was the basis of creditcooperatives that folks lent to each other to establish andmaintain their small businesses and that, I think, has to be acontinuing part of the products and services mix that credit unionshave in today's financial marketplace. A lot of other financialinstitution lenders have a limit to the commercial lending which isfairly high, which is a million dollars, sometimes $2 million, and,for a small business owner who may not need that much money in aline of credit, they need a place to go to get the necessaryfinancing for their business operations. I think credit unions canreally provide those products and services to their [email protected]