ALEXANDRIA, Va. (10/25/11)—Credit unions will be interested to know that the National Credit Union Administration (NCUA) has advised its examiners on alternative ways to view how the sudden inflow of deposits and members caused by the planned Nov. 5 Bank Transfer Day could impact credit union finances.
Saying that the new funds and member "may temporarily depress a credit union's net worth ratio," the agency also noted that credit union call reports allow credit unions "to calculate their net worth ratio in different ways, using 'point-in-time' assets or using a rolling average of assets." The NCUA added that the rolling average of assets accounting approach "was put into place to be more equitable to credit unions who may experience a large payroll deposit on the last day of a quarter or have seasonal fluctuations such as teachers credit unions."
The NCUA said credit unions may only get temporary relief from the net worth effects of these new transfers. "Since this is a rolling average, the longer the deposits stay, the less relief these alternative calculations will provide," the NCUA said.
However, the NCUA added, many of these new members may stay with their new credit unions. If the new members, and their money, remains in the credit union several months from now, "capital retention plans should be updated to include this new factor," the NCUA said.
The guidance was released to NCUA examiners ahead of the coming Bank Transfer Day (Nov. 5). However, many are not waiting for Nov. 5 to make their transfers, as many credit unions have seen sharp increases in membership applications following Bank of America's announcement that they would charge a $5 per month fee for debit card accounts.
A poll commissioned by Creditcards.com found that 78% of debit card holders surveyed said they will switch banks to avoid monthly fees charged when they use their debit cards to make purchases, and credit unions are receiving plenty of positive press ahead of Bank Transfer Day. For more coverage, use the resource link.