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PCA, Risk Management Discussed In CUNA/NCUA Meeting
WASHINGTON (3/15/13)--Agency efforts to update prompt corrective action (PCA) requirements was one of the many regulatory issues discussed when Credit Union National Association President/CEO Bill Cheney and CUNA's Executive Committee met with National Credit Union Administration Chairman Debbie Matz this week.

CUNA General Counsel Eric Richard, Chief Economist Bill Hampel and Deputy General Counsel Mary Dunn joined Cheney and NCUA senior staff at the meeting, which lasted over an hour. Matz during the meeting emphasized that the NCUA "can't hold credit unions back when there aren't safety and soundness issues."

The agency is reviewing its PCA requirements in response to a January 2012 study of the NCUA's handling of problem credit unions, and the NCUA has developed a working group to tackle the issue. The NCUA said it is also considering ways to enhance risk based net worth provisions.

Cheney suggested the NCUA could add supplementary capital authority changes to any PCA reforms it develops, and noted that CUNA wants to work with the NCUA to pursue this. CUNA is also developing PCA recommendations in this area and will be meeting with NCUA Director of Examinations and Insurance Larry Fazio on this topic in early May.

CUNA also plans to discuss due diligence concerns with Fazio in the near future. CUNA has noted that due diligence requirements, regardless of the level of risk, can stymie innovation.

Enterprise risk management, and what it means for examiners and credit unions, was another topic addressed during the meeting. Matz said the NCUA is preparing a supervisory letter to examiners on this issue, a step that CUNA has urged.

Matz during the meeting reiterated her support for derivative authority as a means to help address rising interest rates, and agency staff stated that interest rate risk (IRR) is the biggest forward facing risk NCUA has. On issues such as the measurement of IRR, where there can be legitimate disagreements between credit unions and their examiners, Matz said the agency is urging credit unions to talk with their supervisory examiner.

The CUNA officials strongly urged the agency to allow credit unions to invest in simple derivatives to manage interest rate risks. An NCUA IRR proposal is expected this summer, and CUNA is pressing the agency to move forward on this issue.

Corporate stabilization fund management and examination issues were also discussed during the meeting. Dunn said overall the meeting was productive. "CUNA will continue to pursue all of these issues with NCUA," she added.


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