The second sentence of CU Times Executive Editor Heather Anderson's column in the April 15, 2015 issue of CU Times ("Oh, the Irony: The NCUA, NCUSIF & Alabama One") should be enough to frighten every credit union leader into submitting a comment letter on the proposed risk-based rule – before the April 27 deadline. She mentions NCUA's intent to push for an expanded NCUSIF … with a risk-based premium structure. One more sign that the agency is out of touch.
A quick read of NCUA's 2014 audit of the share insurance fund should convince anyone who hasn't submitted a comment letter on round two of the proposed risk-based capital rule to do so…now! RBC2 assumes that the agency is capable of managing uncertainties, identifying risk and recording potential deficits. But a review of the NCUSIF audit should give pause about that assumption.
In managing the NCUSIF, the NCUA is really managing the member-owners' fund – a combined capital source for every credit union in the nation. Yet, the agency offers no commentary on why its accounting numbers bear no resemblance to real events. In fact, the results make clear that the NCUA dramatically understated the fund's bottom line during the financial crisis, and overstated it in the years afterward. Just as alarming, the funding from the premium assessments is running out, yet the agency isn't close to breaking even on a current period versus actual events.
Here's a true or false quiz for credit union leaders in light of the NCUA's performance over the past several years. Ask yourself if the NCUA:
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Is a learning organization that will adjust models/methods to do better in the future?
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Is willing to innovate and sets goals to do so within the marketplace for a brighter future?
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Doesn't seek to capitalize on "hyped crisis scenarios" for its own agenda and budget building processes?
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Is a victim of bad luck, but doing a great job keeping consumer-owners engaged and member capital safe?
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Has twisted the balance between "insurance" overseer and "compliance" regulator such that change must occur?
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Bonus question: What's the greatest risk to the credit union system? (Hint: Think cloudy crystal ball and lack of accountability.)
If the NCUA can't manage in routine conditions, what can we expect in a future crisis? Picture how life might be under RBC in 2025: "Oops! We guessed wrong, and put you all out of business." Your friends, the NCUA.
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