Although the economy is expected to improve, credit unions still face several years of difficulties as a result of the residual effect of the recession, NCUA Chairman Debbie Matz said in testimony prepared for delivery to a Senate subcommittee.
The number of troubled credit unions will probably increase through at least part of 2011, she noted. Matz said that as of Sept.30 there were 66 credit unions with assets over $100 million with a CAMEL 4 or 5 rating, compared to 12 in 2007. Overall, there are 326 such credit unions, representing 4.9% of all credit union assets.
In written testimony for the Senate Banking Committee's Financial Institutions' Subcommittee she said the recession provided mixed results for credit unions. In that "(U)nprecedented high rates have been recorded for many key financial ratios, including real estate delinquency, aggregate delinquency, and net losses," while the "savings flight to quality" caused a 16% annualized increase of member deposit during the first half of 2009.
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She outlined the agency's efforts to deal with the problems facing corporate credit unions and said the agency plans to unveil proposed rules changes for corporate credit unions later this year.
NASCUS Chairman Thomas Candon said that "(W)hile loan delinquency and net charge-offs have generally increased for state-charted credit unions, state regulators indicate that the levels remain manageable."
He also reiterated his group's support for allowing credit unions to have access to supplemental capital, with regulatory approval. He added that his group would work with NCUA to set up "regulatory parameters," to ensure that any legislative increase in member business lending be regulated in a way that doesn't jeopardize safety and soundness.
Candon, the deputy commissioner of Vermont's Banking Department, urged lawmakers that when working on efforts to revamp regulation, especially in consumer protection to "retain state supervision and uphold state authority," and recognize the value of dual chartering.
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