NCUA Sues Chase, Royal Bank of Scotland

The National Credit Union Administration’s (NCUA’s) legal action against two big banks this week is getting support in the credit union industry.

The agency sued J.P. Morgan Chase and Royal Bank of Scotland, accusing them of selling credit unions $3 billion in mortgage bonds that were “destined to perform poorly.” The NCUA warned that additional lawsuits will be filed to recover losses from the sale of securities blamed for the failure of five large wholesale credit unions.

“By law, the NCUA has to seek ‘least cost resolution,’ which means assuring those responsible for the financial collapse should be paying for the damage caused,” said Northwest Credit Union Association (NWCUA) CEO John Annaloro. “NCUA’s and the U.S. Government’s action on this seems smart and necessary. To stand on the sideline without initiating appropriate legal action would be an injustice to the credit unions of the northwest and the nation.”

“We are certainly pleased the NCUA is taking action to lessen losses to credit unions,” said NWCUA President Troy Stang. “Pursuing those who have deep pockets to make effective restitution and who share the culpability for the events that led to the corporate credit union failures is prudent.”

The Credit Union National Association (CUNA) also applauded the legal action and cautioned that a united front will be needed.

“While this is a very positive step and the agency should be commended for taking it, the fact is that a very tough road remains ahead,” CUNA President and CEO Bill Cheney said. “The institutions being sued by NCUA have significant resources to defend their actions and will no doubt use those resources to the fullest extent.”

While paying for the losses due to the corporate failures has been difficult, the NWCUA and CUNA offer some encouraging data to credit unions:

  • Asset quality is improving steadily – with delinquencies and net charge offs inching down from the previous year. Both are substantially lower than bank norms. This could be a testament to sound lending practices of credit unions.
  • Lending may be on the cusp of an upswing.  Based on a monthly survey of credit unions, CUNA found April lending was up 0.2 percent over March.
  • Membership is growing – at least 300,000 consumers joined credit unions in the first quarter, according to NCUA’s numbers
  • By 2012, capital contributions will outpace asset growth, raising net worth ratios.

NCUA Board Chairman Debbie Matz said the lawsuits against Chase and Royal Bank involve damages of over $800 million. She added that legal action against other financial institutions in behalf of credit unions will seek damages in the billions of dollars.


Questions? Contact AVP of PR & Communications Lynn Heider: 503.350.2225,

Posted in Compliance News, CUNA, Federal, NCUA, NWCUA.