What Can Be Gleaned From The Town Hall Meeting?

Yesterday, NCUA Chairwoman Debbie Matz and senior staff fielded questions from credit union personnel for an hour and a half.  Here are my takeaways.

It appears that the Board will decide at its November meeting that credit unions will not have to pay a share insurance fund premium next year.  But remember this is distinct from the assessment that credit unions pay into the Corporate Stabilization Fund.  The industry is currently committed to paying into that fund until 2021.

The agency is working on a guidance to clarify when a Document of Resolution should be issued as opposed to just an examiner finding.  In order for the guidance be successful, NCUA is trying to define when a credit union’s failure represents a material risk to the safety and soundness of the credit union.  Judging by the number of questions about examiners and examination procedures, as well as the perception among some credit unions that examiners are more aggressively issuing DOR’s than they had in the past, a more uniform definition would be in everyone’s best interest.

NCUA will be issuing guidance on expanded use of MBL exemptions.  While it would, of course, be better to see Congress raise the cap, NCUA can expedite the process by granting MBL waivers and reminding credit unions that such waivers are available.

As I pointed out in a previous blog, one of the real potential advantages to those credit unions with under $30 million in assets being classified as “small” credit unions for regulatory purposes-as NCUA proposed at its last meeting – is the possibility that NCUA will expand its plan to streamline the examination process for well functioning credit unions with under $10 million in assets to this larger class of small credit unions.  This may happen, and is certainly under consideration, but is by no means a done deal.

I was happy that someone asked for an update on NCUA’s consideration of authorizing the expanded use of derivatives by credit unions for the purpose of hedging against interest-rate spikes.  It seems to me that if you’re going to stress the dangers posed by interest-rate volatility, then you have to provide credit unions the financial tools to deal with the problem.  Properly used, interest rate swaps could help guard against too much exposure to long-term mortgages.  However, the speakers pointed out that the use of derivatives requires a degree of sophistication not only for the credit unions that would use them but for the staff that would be responsible for monitoring their use.  The bottom line is NCUA seems to recognize the benefit of these products, but is still trying to decide if the benefit is outweighed by the potential costs both to the safety and soundness of individual credit unions and the examination process for the agency.

Finally, the webinar talked about a legal opinion letter issued yesterday opining that NCUA may approve a credit union’s request to receive a change in its charter and subsequently merge with another credit union with the same type of field of membership.

Have a nice weekend, I’ll be popping back into your inbox on Tuesday.