CHICAGO (7/30/12)--The National Credit Union Administration (NCUA) soon will send letters to nearly 1,000 credit unions indicating they are eligible for low-income designation, a status whose benefits include the ability to accept supplemental capital and an exemption from the small business lending cap under certain circumstances, NCUA Chairman Debbie Matz told league presidents last Friday attending the American Association of Credit Union Leagues (AACUL) summer meeting in Chicago.
"Almost 1,000 credit unions would meet the LICU designation but don't have it," Matz said. "I know with some credit unions there's a stigma to a low-income designation. I hope you will help them get over that," she told the league presidents.
Matz said a letter to these eligible credit unions would likely go out this week or next.
CUNA President/CEO Bill Cheney said NCUA's action will give credit unions greater awareness of their options. "It is a determination that needs to be made by individual CU CEOs and their boards, and the NCUA letter will help them make a more informed decision," he said. Cheney also noted many credit unions that desire more member business lending (MBL) authority or supplemental capital will not qualify as LICUs, "so the agency's action should have no bearing on the need for Congress to pass these two very important pieces of legislation."
Matz also told the AACUL group NCUA plans to "improve the regulatory environment" based on input received from her recent series of "listening sessions" with credit unions around the U.S., including plans to expand the regulatory definition of small credit union beyond the current $10 million asset level, a change CUNA has long advocated through its Small Credit Union Committee. Matz added interest in such an expansion is shared by NCUA Board Member Gigi Hyland, who also addressed the AACUL meeting.
Other changes the agency is considering include removing the personal guarantee requirement on MBLs, expanding the definition of rural field of membership to make it more flexible, allowing CUs to hold Treasury Inflation Protected Securities, and liberalizing rules to encourage more CUs to offer low cost payday loan alternatives.
The actions are part of a broader agency regulatory modernization effort, which also included recent Board decisions to improve its rule on troubled debt restructuring (TDR) and to pull back pending proposals on credit union service organizations (CUSOs) and loan participations based on concerns expressed by CUNA, leagues and credit unions.
"We heard you on a number of different issues," Matz said, taking special note of CUNA Deputy General Counsel Mary Dunn's help pulling together a credit union/league working group to provide input to improve the TDR rule.
Matz also repeated announcements from earlier last week on agency plans to create a new Office of National Examinations and Supervision to focus on credit unions with assets over $10 billion and corporate credit unions, and to expand the work of NCUA's Office of Small Credit Union Initiatives to provide more training and consultation for those small credit unions that have been struggling. She said she hopes leagues will also assist in this regard with small credit unions.
Lastly Matz urged leagues and CUNA to help explain liquidity options to credit unions in light of the agency's recent liquidity proposal and the impact the closing of U.S. Central Bridge in October will have on dramatically reducing available emergency liquidity through the Central Liquidity Facility. CUNA has a task force working expressly on this issue.
In her remarks Board Member Hyland also encouraged leagues to urge credit unions to comment on the liquidity proposal. "Ensure credit unions are at least thinking about this--'What will happen should I need emergency liquidity and where will I go?'"
Matz and Hyland also responded to concerns voiced by several league presidents about the impact on the dual chartering system of the agency's proposed rule on troubled state credit unions, which would permit NCUA to assign a lower CAMEL rating when theirs conflicts with a higher one assigned by the state regulator.
Matz emphasized the proposal is needed in the agency's role as protector of the National Credit Union Share Insurance Fund, and said it only affects about 2% to 4% of state credit unions. Hyland said she believes "It's better to have two guards on watch than one," especially when some state regulatory authority budgets have been cut back.