NWCUA Gets Regulators to Drop Controversial Proposal from Agenda

July 26, 2011

Net Worth and Equity Ratio Proposal Removed from Agenda
The initial agenda had included discussion and possible adoption of a proposed rule regarding federally insured credit union net worth and the National Credit Union Share Insurance Fund (NCUSIF) equity ratio. The concerning provision was a technical change allowing the deduction of “bargain purchase gain” in some mergers, which would reduce the net worth available to the acquiring credit union.

An Association letter to the NCUA chairman’s office stated: “The Association is concerned about the possible impact of this provision on not only future mergers but the potential for retroactive action if this proposal were to be adopted as originally proposed.”

The Association pushed for more study on the issue and “additional comment from credit unions,” and urged the Board to “drop this provision in the consideration of the final rule.”

The chairman’s office replied that this issue had been pulled from consideration at the July meeting and that the NCUA will be working with stakeholders to see what can be done about this provision.

Staff will continue to work with the NCUA on this matter.

Proposed Rule on CUSO Audits and Exams
Another key issue addressed at the NCUA Board meeting was a proposal requiring all credit union service organizations (CUSOs) and their subsidiaries to use GAAP accounting, get annual audits, and file quarterly financial reports directly to the NCUA and the appropriate state supervisory authority.

The proposal would require all Federal Credit Unions (FCUs) and federally insured state credit unions (FISCUs) to include a provision in agreements with CUSOs that would require them to report annually to the NCUA. Further, the Board would limit “less than adequately” capitalized FISCUs’ cash outlays to CUSOs as is currently required of FCUs.

The Association finds this proposal greatly concerning. Though it supports regulators examining credit unions and credit unions’ due diligence in the selection and monitoring of service providers and CUSO partners, the Association believes the breadth of services currently provided by CUSOs may be outside the examiner’s area of expertise.

The NCUA will offer a 60-day comment period on this matter once it has been published in the Federal Register and will allow a compliance period of not less than six months after the rule is finalized. The Association will be providing a thorough summary of the proposal and seeking comment from credit unions on the potential impact of this proposal.

Additional Items:

  • The NCUA reduced its operating budget by $2 million or about 1 percent for FY 2011. The Association has urged the agency to reduce costs and pare down its budget;
  • The Board approved an interim final rule making changes to regulations on remittance transfers as required by the Dodd-Frank Act; and
  • The Board approved a plan allowing the Temporary Corporate Credit Union Stabilization Fund to borrow $4 billion from Treasury to help retire outstanding promissory notes issued by the bridge corporate credit unions.

The full NCUA meeting summary can be found here.


Questions? Contact Director of Regulatory Advocacy Jaycee Winn: 503.350.2209, jwinn@nwcua.org.

Posted in Compliance News, NCUA.