Perspectives on NCUA’s Washington DC Town Hall Meeting

While participants spoke on a variety issues, four key issues seemed to resonate most often in their comments and questions. Here is a summary of these issues and selected comments from attendees.

 
 

More than 200 representatives from credit unions, corporate credit unions, state leagues, and associations participated in the NCUA Town Hall meeting at National Harbor outside Washington, DC, on Wednesday, September 30, 2009. NCUA Chairman Debbie Matz, board members Michael Fryzel and Gigi Hyland, Director of the Office of Corporate Credit Unions Scott Hunt, Deputy Executive Director Larry Fazio, and General Counsel Bob Fennel responded to questions and comments during this second of three scheduled meetings.

While participants spoke on a variety issues, four key issues seemed to resonate most often in their comments and questions. Here is a summary of these issues and selected comments from attendees.

Directing Credit Union System Resources to Credit Unions

Concerns about how NCUA is using the system resources that are under its control came through in a number of comments. NCUA now oversees over $180 billion in collective resources in managing the two largest corporates, the NCUSIF guarantee, oversight of the CLF, etc. Managing these assets in credit unions' interest - that is, directing these resources towards credit unions rather than drawing from credit unions - is the primary concern.

"How did the ultimate decision come to be to use credit union capital instead of loans from the CLF or other system sources?"

"Capital Notes, similar to the concept used with U.S. Central, should be made available to credit unions with less than 7% net worth."

"Ensure that credit unions are involved in the oversight of system assets, including the conserved corporates, because getting buy-in at this stage is critical to moving forward."

Alignment with Other Regulatory Agencies

Questions were raised about NCUA's policies and how they differ with the approach other regulatory bodies have pursued. The need for flexibility and creativity during a period of extraordinary uncertainty in markets and the economy was underscored.

"What enabled the FHLB to deal with OTTI in its more measured way, as opposed to NCUA's draining of capital?"

"Will there be a 'payback' model so that capital is replenished as earnings come back?"

Alternative Capital Options

Credit unions raised a number of points regarding alternative capital, including the member capital proposal being issued by CUNA and NAFCU. While some expressed reservations, the focus is on how such alternatives can allow credit unions with capital constraints to continue effectively serving members.

"It appears that we need relief from a natural person credit union standpoint, some type of relief for capital accumulation other than what we have today. Will NCUA be with us to help ensure that we will thrive?"

A Vision for the Credit Union System

Perhaps the overriding theme from the session was ensuring that a vision of the credit union system’s future is perceived by NCUA through its interaction with industry leaders. The issue is that rulemaking cannot solve the range of challenges and opportunities facing credit unions today. Credit unions want to maximize the possibilities of where they can go in the 21st century.

"What is the vision we want of the credit union system? It seems most of the things we are doing are just to correct the present problems. We need to able to say, 'This is the system we want.' But we're not seeing any vision – just a lot of corrective maneuvering."

"Part of the corporate network's future design should be done jointly with the CLF to create a new capability for system access to secondary markets"


Click here to read Callahan & Associates' EVP Jay Johnson comments on the need for specific NCUA policy for managing present circumstances.

 

 

 

Oct. 5, 2009


Comments

 
 
 
  • I appreciate the reporting of what I believe were very thoughtful questions.Why did the reporter not include any responses by NCUA? The title preasumes teh reader would get both teh questions and responses.
    John Gregoire
     
     
     
  • Our goal was to identify the outcomes credit unions are looking for as they shared their priorities for the system with NCUA. The overriding concern for many credit unions is what is missing - a vision for the system as a whole and corporates in particular (the last point in the article). This gap is leading credit unions to look at alternatives to corporates for processing and investment services - the Iowa League's application to purchase a bank charter is the latest example. Until NCUA demonstrates an ability work collaboratively with the industry on addressing this fundamental issue, the corporate network will be viewed as a risk to the system rather than a positive force.
    Jay Johnson
     
     
     
  • I agree. I read the article with the idea I woiuld as you put it hear the voices of the NCUA. All I saw was what I already have "heard" from other CU's. Honestly, NCUA had blindsided us with this NCUSIF problem and we are all hurting in various degrees. We need solutions and ideas for "preventative" action.
    R Zarlingo
     
     
     
  • The article misses the pivotal issue, that of the need to recapitalize corporate credit union in amounts necessary for their survival; not going to happen.
    Raymond Dowling