Matz Proposal Seeks to Make NCUA Friendlier to Small CUs; But How Much Can Agency Do?

ALEXANDRIA, Va. – NCUA Board Member Deborah Matz has long been concerned with the steady decline in the numbers of small credit unions and has worried about what their loss might presage for the credit union industry overall. Now she has proposed an initiative which would change the way NCUA deals with small credit unions in a way that she hopes will help more of them survive. “This initiative will assist small credit unions which are at the forefront in serving people of modest means and are invaluable in preserving the tax exemption for all credit unions,” Matz explained. “To some key lawmakers, small credit unions are the icon of the credit union movement. Their disappearance could threaten the tax exemption for all credit unions.” The initiative would move two positions remaining of the five positions unfilled after NCUA’s last reorganization to the Office of Credit Union Development to help small credit unions. One position would coordinate training programs for small credit unions on vital issues such as board responsibilities, internal controls, recordkeeping, regulatory compliance, and the need to offer new services that can help small credit unions grow. The other position would focus on training all NCUA examiners who work with small credit unions. This would ensure consistency from examiner to examiner and from region to region. “This is something I hear over and over when I travel,” Matz explained via cell phone from South Dakota where she had taken some leave time to campaign on behalf of Senator Tom Daschle, the Senate Minority Leader from South Dakota. “Small credit unions can face some real challenges in dealing with different examiners and often lack the resources to deal with those challenges,” she added. Daschle, who was involved in a close bid for re-election this year, which he eventually lost, recommended Matz for her current position as one of NCUA’s three board members. The initiative would also move the agency’s 15 Economic Development Specialists from their current almost random smattering though the agency’s regions to work under its credit union development office, which is currently staffed by three or four staffers, Matz said. “Small credit unions require a more tutorial approach, and our EDS’s are shining examples of the effectiveness of this strategy,” Matz observed. “Credit unions receiving on-site assistance from EDS’s are much more likely to remain viable. Centralizing the EDS’s will make the program more efficient in reaching more of the credit unions that are most in need of assistance.” Matz said that the move would better equip NCUA to standardize the training of its EDS’ staff, some of which have been highly praised by small credit unions and heavily criticized by others. “Small credit unions represent nearly 50% of all credit unions, yet proportionately less examiner time – 38% – is spent on these institutions,” Matz noted. “This includes work on mergers and liquidations. If that work is subtracted out, the time spent actually helping small credit unions stay in business is far less,” she said. Adding that her initiative would make small credit unions become a regular part of NCUA’s agenda. With the remaining three positions that were not filled after the regional realignment, Matz recommended focusing on other emerging safety and soundness threats. For example she noted that two of the positions could be reallocated to serve as Subject Matter Examiners (SMEs) in Specialized Lending. They could focus on examining indirect lending programs in regions where NCUA staffers have identified particularly high indirect lending risks. And the final position could be reallocated to NCUA’s Office of Corporate Credit Unions (OCCU). This would respond to the report released last month by the Government Accountability Office (GAO), which determined that OCCU will need greater resources to effectively examine corporate credit unions. Matz reported that she and NCUA Board Charman JoAnn Johnson had not yet finalized their agreement on the initiative yet, but that she hoped that could be done relatively soon so that the proposal could be set into place for small credit unions as quickly as possible. The National Federation of Community Development Credit Unions welcomed NCUA Board Member Debbie Matz’ proposed initiative to make the agency more responsive to the needs of small credit unions, according to NFCDCU Executive Director Cliff Rosenthal. But he also cautioned that the agency “had too many things on its agenda to do the work of a trade association” for the smaller institutions. Matz initiative would move two of the five regional agency positions for which funds have been budgeted but which have been left unfilled to the Office of Credit Union Development. It would also seek to better standardize the way that examiners deal with small credit union issues and how the agencies economic development specialists are trained. “One of the things that has been supremely frustrating for small credit unions has been the way that a new examiner will come in and reverse many of the previous examiner’s decisions,” Rosenthal explained. “That has been very hard particularly for a small credit union to be able to handle.” -