CUNA pushes for CU asset relief plan

WASHINGTON (10/31/08)—Although the need may be modest, credit unions should have their own credit union-funded troubled-asset relief program through their federal regulator, the Credit Union National Association (CUNA) proposed Thursday.

Testifying at the National Credit Union Administration's (NCUA's) eighth annual public budget briefing, CUNA reported that credit unions, despite the current economic upheavals, are generally in good shape with overall net worth around 10.5% of assets.

Click to view larger imageTom Gaines, chairman of the CUNA Examination and Supervision Subcommittee, and president/CEO of the Tennessee Credit Union League, tells the three-member NCUA Board that CUNA believes any potential capital deficiency among credit unions due to the financial meltdown is likely modest--given that overall credit union net worth is about 10.5%. (Photo provided by CUNA)
Still, a small number of credit unions have become "collateral damage to the collapse of housing prices in some markets." Those cooperatives should be able to seek assistance either through the U.S. Treasury Department's Troubled Asset Relief Program (TARP) or a similar plan administered by the NCUA just for credit unions. Those cooperatives are able to seek assistance through the U.S. Treasury Department's Troubled Asset Relief Program (TARP); however CUNA supports the development of a similar plan, administered by the NCUA, just for credit unions.

Tom Gaines, chairman of the CUNA Examination and Supervision Subcommittee, testified on CUNA's behalf. Gaines is president/CEO of the Tennessee CU League.

Gaines also made the following points at the briefing:

  • CUNA continues to support full insurance coverage for noninterest bearing transaction accounts;

  • Credit unions are concerned about an insurance premium. The NCUA board should closely monitor this issue and provide credit unions as much advance notice as possible if a premium assessment is likely;

  • The NCUA may need additional staff to handle problems. CUNA does not oppose additional staffing, but requests the agency make no unnecessary additions; and

  • The NCUA has improved its handling of the overhead transfer rate issue, but CUNA maintains it is still unclear how insurance-related costs are distinguished from supervisory ones.

Click to view larger imageTom Gaines (left), chairman of the CUNA Examination and Supervision Subcommittee, and president/CEO of the Tennessee Credit Union League, chats with NCUA Board Member Gigi Hyland during a break in yesterday's NCUA Budget Briefing. (Photo provided by CUNA)
Gaines also noted that CUNA is currently completing a survey on regulatory examinations and share the results with the NCUA and the National Association of State CU Supervisors.

"We already know that credit unions are raising concerns about examiner pressure regarding return on assets (ROAs)," Gaines said Thursday. "NCUA should continue to provide training to examiners on communications and ensure board members' views are reflected in examiner actions."

He added that credit unions continue to seek more regulatory guidance on Bank Secrecy Act issues.

In concluding, Gaines acknowledged that the country's economic woes will make the coming year will difficult for credit unions and he said CUNA appreciates the regulators' efforts to "contain cost and reduce regulatory burden."

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Resource Links
NCUA budget briefing PowerPoint presentation (pdf download)
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