On January 15, NCUA chairperson Debra Matz announced a policy to fine credit unions to ensure timely filing of all call reports. According to Matz, more than 1,000 reports had been late at the third-quarter deadline. The proposed fines are draconian, up to a $1 million per day.
The rationale for the new enforcement is that timely information is vital for proper oversight of the credit union system. Certainly timely data is better than stale data; but is the real problem late filing or is it other factors? Has the NCUA demonstrated a commitment to timeliness in its own reporting responsibilities to Congress and to credit unions?
The Call Report Release Dates For FOIA Files
These are the gaps in days between the final due date and the release of the FOIA tape for the first three 5300 quarterly reports filed by credit unions in 2013:
1st Quarter: Released April 19, or 40 days after the report deadline.
2nd Quarter: Released July 22, or 38 days after the report deadline.
3rd Quarter: Released Dec. 2, or 41 days after the report deadline.
These results do not suggest any meaningful variance in NCUA’s release of data. The due date for the fourth quarter was January 24, so looking ahead, a release date on or before March 3, 2014, or 38 days after the report deadline, would show improvement in NCUA’s information processing.
Is The Problem The Deadline Or The Process?
There are more than 1,200 account codes on the financial portion of the 5300 filing. After surveying recent reports, a data processing firm that helps credit unions complete the form estimated that only 40% of the questions were relevant. The rest of the questions were blank, but every credit union had to review them even if the answer was 0 or N/A.
In the profile form that accompanies the 5300 financial filing, credit unions have up to 700 more data cells to answer or check. These include information systems data, payment providers, disaster recovery, miscellaneous regulatory information (e.g. date of annual meeting), CUSO investments and/or loans, credit union programs and services, grant information, partnership information, merger registry, personnel contact information, and site information including “all locations the credit union operates from, shared service centers, disaster recovery locations, vital records center, hot site, and location of records.” In total, credit unions have up to 20 pages of additional information to review and complete.
The reporting process has become so cumbersome, repetitive, and pervasive that finishing the forms is an ever-expanding challenge. Even with profile data — much of which could be routinely collected during exams — NCUA seems unable to use it to enhance its own or the system’s performance. For example, when NCUA was proposing the CUSO regulation, it disavowed the value of the data it had been collecting for more than two decades. Instead, it established a whole new reporting process.
Like the NSA, the NCUA is collecting data just because it can with the presumption that it might be useable under some future circumstance.
Timely Reporting By NCUA
In a cooperative system, timely reporting at all levels provides data and transparency for everyone — members, management, and regulators — to observe. All have a common stake in both system and credit union self-improvement. Unlike the banking system, cooperatives do not have conflicts of interest between shareholders and customers or owners and regulators. In contrast, credit unions’ common interest in using timely, accurate, and in-depth data helps make the system cooperative strong.
In critical areas where NCUA has had control of the inputs, process, and output of information, it has not demonstrated timely reporting. Here are three ongoing responsibilities where improvement by NCUA would benefit the entire cooperative system:
The board’s Annual Report Section 102(d) of the Federal Credit Union Act requires that “Not later than April 1 of each calendar year, and at such other times as the Congress shall determine, the Board shall make a report to the President and to the Congress.” Under the leadership of both Fryzel and Matz, NCUA has never met this deadline. Moreover, it completely failed to issue an Annual Report for 2008. The release date for the 2012 report was May 14. Under Chairperson Matz’s new policy, this would result in a $44 million fine.
Corporate Monthly Call Reports. Each month, every corporate credit union files a 5310 Call Report similar to the 5300 but focusing on their unique financial structure. Fourteen corporates remain in operation. Their month-end reports are due not later than the 25th after the close of the month. The lapse in posting this monthly data for downloading averages almost 60 days, or 2-3 weeks longer than the time needed to post the 6,700 natural person call reports.
TCCUSF updates. The Temporary Corporate Credit Union Stabilization Fund (TCCUSF) is NCUA's largest ongoing assessment of credit unions. In return for this funding, NCUA promised timely and transparent reporting. Yet it only provides updates in the legacy asset values and TCCUSF trends every six months. It released the most recent update, June 2013, in late November, long after the board had assessed another premium of more than $700 million. The data released in November showed there had been a $5.2 billion gain in the value of the investment assets for the 18-month period ending June 30, 2013. This data should have been available and publicly used in the board’s assessment deliberations. Instead, eight-month-old information was the only update provided.
Timeliness Requires Board Commitment And Process Improvements
NCUA’s goal of timely system reporting is laudable. But if this is an exercise to deflect attention from its own responsibilities, then nothing will change. The NCUA board must walk the talk in making information timely and meaningful. One of the advantages of the cooperative model is the readiness of credit unions to share information for their own and the system’s benefit.
For this exchange to succeed, all parties must accept responsibility for designing, filing, and releasing data effectively. If NCUA engages credit unions earlier and collaboratively, rather than fining late filings, it can improve processes and enhance data quality.
Let’s hold off on the fine talk. Instead, NCUA should start a dialogue with all parties to make the cooperative system a leader in timely and complete transparency. That would make cooperative strong an even greater system advantage.