WASHINGTON — Although he did not ride in on a horse or draw a gun, NCUA Chairman Michael E. Fryel made clear at NAFCU’s Congressional Caucus that there is a new sheriff in town.
Seven weeks into his tenure and facing one of the nation’s worst financial crises in history, Fryzel promised to be aggressive and proactive in dealing with problems of individual credit unions and the industry as whole.
“Now is not the time for a ‘business as usual’ passive approach. Rather, I will be very direct: where I see a balance sheet problem, I will move decisively to resolve it,” he said during his address at last Wednesday’s closing session of the conference. “Where I see adverse trends, I will take steps to correct them. And where activities prove to carry unacceptably high levels of risk and expose consumers to potential loss, I will intervene decisively.”
He also announced that before the end of the year, there will be a government-industry summit to discuss the health of the industry.
Fryzel also promised to undertake a “broader and more comprehensive stress test” of the agency’s share insurance fund.
“The confidence that I have on our close and careful supervision cannot be built on assumptions: I want data and I want it to be thorough, and I want it based on real-world scenarios,” he said.
In a subsequent interview he said there were no major problems with the fund, but current financial uncertainties have created the need for a “new fresh look” with different factors taken into consideration. He declined to elaborate, but said he would do so soon.
Fryzel, the former top financial services regulator in Illinois, referred to a letter sent to credit unions this summer outlining a more aggressive approach to assessing how well credit unions are prepared to deal with risk. He noted that the agency’s examiners have been instructed to focus more intensely on these aspects of credit unions’ operations.
In his speech to the convention earlier in the week, NCUA Vice Chairman Rodney Hood advocated credit union executives integrating enterprise-risk management into their operations and not isolate it to one department.
Hood, who has made the issue of risk management a cornerstone of his tenure on the board, referred to the letter to credit unions on the subject and said the evaluations will focus on not only how well credit unions have managed risk in the past but also safeguards for the future. The key elements of a risk-management strategy range from keeping business strategies in line with the credit union’s risk appetite to linking risk levels to the returns the credit union expected to attain, he noted.
Hood said the goal of the agency “is not to play gotcha but have a collaborative, constructive process.”
He praised the performance of credit unions in serving the needs of their members and helping the economy. He noted that “credit unions didn’t cause problems in the financial markets, but credit unions can play a role in the solution.”
NCUA Board Member Gigi Hyland pledged to defend a separate regulatory body for credit unions. Some regulatory restructuring proposals, including one offered by the Treasury Department, have called for consolidating bank, credit union and thrift oversight into one agency.
She stated that the federal credit union system was born during a time of financial tumult, and its role as a provider of sound financial services has never been more important than in difficult times such as those the country is currently experiencing. She said many of the upcoming celebrations of the 75th anniversary of the federal credit union law, which was passed as part of the New Deal, will focus on consumer education. The agency plans to use traditional vehicles such as brochures but are also considering innovative communication tools such as YouTube.
Additionally, Hyland has scheduled a Webinar on share insurance for Oct. 7.
Hyland praised attendees for taking the time to become politically active, especially writing comment letters. “I read every comment letter and use them as a basis for my decision making,” she said.