NCUA Pushes for Corporate Credit Union Reforms

New Rule Has Comprehensive Framework for Stronger Oversight The National Credit Union Administration (NCUA) board has proposed corporate credit union reforms to establish a comprehensive new framework for safety and soundness.

Even before the takeover of corporate credit unions by the NCUA earlier this year, and the firing of a corporate credit union CEO, the regulatory agency has eyed change in the corporate structure.

In the Board's announcement, the proposed reforms are intended to enhance NCUA regulatory oversight and address deficiencies in the current rule.

"The future of the corporate system and the role the new regulatory framework plays in affecting that future clearly have far-reaching implications," says NCUA Chairman Debbie Matz. "Our main objective is to preserve service to 93 million credit union members by preventing the corporate issue from becoming a consumer issue."

Matz notes that corporates play a critical role in payment systems, liquidity and investment services. "It is essential to properly limit the risks in which corporates can engage," Matz says.

The revisions would strengthen four areas of corporate credit union regulation:

  • Capital Standards - requiring retained earnings and Prompt Corrective Action
  • Asset/Liability Management - preventing mismatches and preserving liquidity
  • Risk Concentration Limits - ensuring diverse investment pools and risk mitigation
  • Governance - setting board qualifications and increasing transparency

Each reform would directly improve an aspect of current oversight critical to the proper functioning of the corporate system. Lack of adequate capital standards, insufficient asset/liability management tools, and unacceptably high risk concentrations were problems identified by NCUA and stakeholders during development of the proposal.

Matz says the "approval of the Proposed Corporate Rule is another significant step in our overall effort to stabilize and reform the corporate system." The comment period before the Board vote generated nearly 500 responses, and she says the agency has brought the widest audience together to generate feedback. Matz will hold two more town meetings and a webinar during the 90-day comment period.

Even with a strong regulatory framework, Matz says the future of the corporate system "will depend on the needs and support of the credit unions they serve. This proposed rule does not prescribe how many corporates will exist, where they will be located, or what services they will provide."

She adds that the NCUA believes those issues should be answered by the natural-person credit unions the corporates serve.

About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.

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