Matz Takes Senators’ Questions on Handling of Credit Union System Issues (Misc News: December 9, 2010)
After sharing a 43-page state-of-the-industry statement with the Senate Banking Committee, NCUA Chair Debbie Matz handled questions from Senators of both parties on the state of the credit union system, including corporate credit union resolution, safety and soundness, and whether there is sufficient oversight of individual credit unions.
The majority of Matz’s statement focused on the three-step process the agency used to stabilize, resolve and reform corporate credit unions. She outlined the NCUA’s goals to “preserve confidence in the credit union system” and to simultaneously “facilitate an orderly transition to a new regulatory framework for the corporate credit union system.”
When discussing retail credit unions, she touted the recent growth in both members and deposits and the low rate of charge-offs, but cautioned that more credit unions are moving toward instability. To that end, she also offered NCUA’s supervisory improvements, including moving to a 12-month examination schedule (from an 18-month schedule) for federally-chartered credit unions and adding additional examiners to increase oversight of state-chartered credit unions.
“NCUA’s increased supervision has contributed significantly to the credit union system’s ability to withstand the extraordinary economic shocks over the past two years,” stated Chairman Matz. “Our experience demonstrates the value of rigorous regulation, diligent oversight, and a healthy insurance fund. Equity in the National Credit Union Share Insurance Fund is now up to 1.29%, near the high end of its normal operating range.”
Questions came from incoming Senate Banking Committee Chairman Tim Johnson, who asked Matz whether the report that the failure of 10 credit unions stemmed from shortfalls in NCUA’s examinations, and Sen. Richard Shelby, who sought insight into the viability of credit unions burdened with replenishing the share insurance fund.
A Wall Street Journal Article on the testimony cited Matz’s statement that action by the federal government (issuing $35 million in government-guaranteed bonds) saved 1,000 credit unions from insolvency.
“Inaction would have resulted in massive disruption to consumer services," Deborah Matz, chairman of the National Credit Union Administration said in written testimony submitted to a Senate Banking Committee hearing.
"Total costs to any remaining insured credit unions would have been far greater than the resolution strategy" the government undertook, she said.
Read more analysis of the statement in the CU Times and the Wall Street Journal.