Regulatory Advocacy Update
September 28, 2011
September 29, 2011
At the urging of the Northwest Credit Union Association (NWCUA) and industry groups, the National Credit Union Administration (NCUA) board removed from consideration at its July board meeting a controversial proposal amending the Federal Credit Union Act definition of the National Credit Union Share Insurance Fund (NCUSIF) equity ratio and credit union net worth. After additional study, changes were adopted at last week’s NCUA board meeting.
In a July 20 letter to NCUA Board Chairman Debbie Matz, the NWCUA vehemently objected to a provision in the proposal which would add language to require bargain purchase gain be deducted from the net worth of a target credit union prior to a merger. The Association called to the board’s attention the potential for this provision to lower net worth after a merger, possibly discouraging otherwise beneficial mergers, and expressed concern about this provision being enacted retroactively.
Matz addressed the concerns expressed by the NWCUA in the meeting, saying the new definition would not be applied retroactively and that the intent of the change was not to discourage future mergers. NCUA staff also noted that in the case of the more than 100 mergers over the course of 2011, of those involving bargain purchase gain, the largest decrease in net worth would have been .47 percent.
While scheduled to be effective 30 days after publication in the Federal Register, the changes required to implement this new definition may move that date closer to the end of 2011.
The impact of this change should be negligible, and the Association will continue to monitor this issue should it be magnified in the future.
Additional items covered at the Sept. 22 board meeting:
- NCUSIF and Temporary Corporate Credit Union Stabilization Fund (TCCUSF) Summary—The NCUSIF equity ratio was reported at 1.31 percent based on insured shares as of Aug. 31. The normal operating level set by the Board is 1.3 percent. Should the fund equity ratio exceed that level at the end of the year, any surplus will be transferred to the TCCUSF.
- Industry CAMEL Ratings—As of August, 369 federally-insured credit unions with assets of $34.8 billion and shares of $30.9 billion had CAMEL code 4 or 5 designations. Additionally, 1,791 CAMEL code 3 credit unions had assets of $147.2 billion and shares of $131 billion. Overall, approximately 18 percent of all credit union assets were in CAMEL code 3, 4, or 5 institutions. The percentage of assets in CAMEL code 1 and 2 credit unions has increased slightly in each of the past six months.
The NWCUA Regulatory Advocacy team works with state and federal regulators to help reduce the regulatory burden on credit unions and protect the credit union movement. The Association encourages members to participate in the regulatory process. If you have any questions on these or any regulatory issues, please contact Director of Regulatory Advocacy Jaycee Winn at firstname.lastname@example.org, or at 800.995.9064 x209.