NWCUA letter on Troubled Condition

October 1, 2012



Mary Rupp                                                                                                            Delivered Electronically

Secretary of the Board

National Credit Union Administration

1775 Duke Street

Alexandria, VA 22314

Subject:      Definition of Troubled Condition; RIN. NCUA-3133-AD97

Dear Ms. Rupp:

On Tuesday, July 31, 2012, the National Credit Union Administration (NCUA) published a notice of proposed rulemaking regarding the definition of troubled condition. The NCUA initiated the rulemaking under the broad context of protecting the National Credit Union Share Insurance Fund (NCUSIF). The Northwest Credit Union Association (Association)[1] appreciates the opportunity to respond to the NCUA’s proposal seeking input on the definition of troubled condition and asks that the NCUA not issue a final rule on this proposal. 

General Comments

The Northwest Credit Union Association is encouraged by the strong partnership between the state and federal examiners in both Oregon and Washington. We commend our state and federal examiners for collaborating on CAMEL ratings. The current standard of having Federally Insured State Credit Unions’ (FISCUS) primary CAMEL rating issued by their state regulator and Federally Chartered Credit Unions’ (FCU) CAMEL ratings issued by the federal regulator is consistent with the strong dual-charter system supported by the Association. 

Specific Concerns

The NCUA’s justification for the proposed rule does not meet the president’s standards for proposed rulemaking set out in Executive Order 13132 referenced in the Federal Register announcement. The justification that the proposal’s primary purpose is to guard against ratings discrepancy as a precaution to protect the fund is overly broad. The only supporting statement to the assertion is that the NCUA is uniquely positioned to observe national trends in the credit union industry, noting that the agency has seen an increase in the number of mid-size credit unions with some degree of financial stress. A number of industry participants and state regulators have recognized a similar trend. The lack of clear justification for this rule leaves the NCUA vulnerable to criticism for acting on anecdotal concerns rather than systemic issues.

The current tools outlined in § 701.14(b)(3)(ii), which automatically assign a troubled condition rating to a credit union that has received special assistance to avoid liquidation, provides the necessary authority to preemptively assign the appropriate CAMEL rating in a case beyond dispute. In a case where there may be valid disagreement over the CAMEL or CRIS rating, the primary regulator should have the final authority in issuing the rating. The NCUA should resist the urge to take state powers and instead focus on building strong partnerships with state counterparts.

The board of directors of the Association has adopted the following position statement regarding dual chartering: 

“We strongly support a regulatory system that allows dual-chartering to thrive under the belief that dual-chartering (the choice between a federal or a state charter) allows for the incubation of new powers and authorities and promotes credit union self-determination. The Association supports legislation and regulation that serves to enhance dual-chartering in Oregon and Washington, and throughout the United States.”

The current NCUA rule on troubled condition is in direct opposition to our board position. We have concerns that the broad, unsupported statement of justification could be used indiscriminately to further erode the powers of state regulators.


While the Association believes that the troubled condition rule would generally not impact Oregon and Washington credit unions due to the strong working relationship between state and federal regulators, the Association has serious concerns about the erosion of the dual-chartering system. The Association asks the NCUA to consider: 

1)                  Primarily not issuing a final rule;

2)                  Primarily encouraging activities that strengthen relationships between federal and state regulators;

Thank you for the opportunity to comment on this issue. We would be pleased to answer any questions you may have. 


John Trull

Director of Regulatory Advocacy

Northwest Credit Union Association

[1] The Northwest Credit Union Association is a regional trade association representing the interests of more than 200 credit unions and their six million consumer-members; institutions that employ and engage more than 10,000 people and hold more than $50 billion in aggregate assets. The Association is a nonpartisan advocacy organization representing the interests of its member institutions on a variety of systemically important banking issues.


Credit unions affiliated with the Association are principally domiciled in the Northwest quadrant of the United States, but the Association also has members from the states of Alaska, Idaho, California and Hawaii. Learn more about the Association at nwcua.org.

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