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Matz details exams fine balance responding to congressional concerns
ALEXANDRIA, Va. (11/12/09)--Responding to a recent letter from Reps. Barney Frank (D-Mass.) and Walter Minnick (D-Idaho) that asked federal regulators to "show some temperance" during their examinations of financial institutions, National Credit Union Administration (NCUA) Chairman Debbie Matz said that the agency is working to balance the lending needs of a weakened economy with the need to ensure the “safety and soundness” of the institutions insured by the NCUA. Specifically, Matz said, the NCUA is drafting a supervisory letter to encourage credit union examiners to “show flexibility” if a credit union that is undergoing a period of financial stress “demonstrates adequate long-range strategic planning that would enable the institution to weather broader economic difficulties.” According to Matz, the NCUA’s view is that it “may be appropriate for a credit union to forego short-term earnings so that a high level of member service can be maintained,” in some circumstances. Matz also detailed some ways that the NCUA is encouraging further leeway for both credit unions and their members through its support of residential real estate mortgage loan modification programs and a recent joint policy statement with the Federal Financial Institutions Examination Council (FFIEC) that spoke in support of prudent commercial real estate loan workouts. The NCUA/FFIEC statement “provides guidance for examiners and financial institutions that are working with CRE borrowers who are experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties,” according to Matz. The NCUA will also provide examiners and constituents with further guidance, information on best practices, and insight into the underwriting and examination of member business lending during a Nov. 18 webcast led by board member Gigi Hyland, the letter added.

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