Before NCUA’s “Regulatory Backlash”

In my Credit Union Museum video, I described NCUA’s approach to credit unions since 2009 as an era of “regulatory backlash.”  The term summarizes the unilateral imposition of rules, premiums and new examination tests after the Great Recession crisis. The agency repeatedly asserted it was an “independent” ruler and  treated credit unions as their subjects.

One example is the creation of the 424-page risk based capital rule which is so burdensome that it has been postponed for almost 8 years.  Meanwhile the FDIC has dropped this as a required calculation.

One reader disagreed.  He said the backlash began in 1998 with the imposition of PCA on credit union net worth assessments as part of the Credit Union Membership Access Act.  (CUMAA)

However NCUA’s record suggest this is not the case.   When the Supreme Court ruled 5 to 4 in 1998 that the field of membership of a federal credit union could only be a single group, a substantial portion of new members added by FCU’s would have been thrown out if CUMAA not been passed.  It was Treasury, not NCUA, that imposed the PCA, in return for their not opposing this legislative change.

NCUA’s Support for the Credit Union System

The following are brief highlights from NCUA’s 2000 and 2001 Annual Reports demonstrating multiple ways the agency continued to support the credit union system beyond its traditional examination and supervision roles after PCA.

This cooperation began in the deregulation era of the 1980’s.  This early effort culminated in the passage of Congressional legislation redesigning the NCUSIF along cooperative principles in 1984.

Chairman Ed Callahan described this Great Victory in this 1.5 minute NCUA Video Network excerpt from 1984.  His central point is how everyone contributed to achieving this unique result.

The Key Themes of a Cooperative Regulatory Approach

The Annual Report excerpts that follow demonstrate the agency’s efforts at cost control, financial transparency, joint assistance programs, and an overt willingness to support cooperative expansion.   NCUA  recognizes and supports the diverse and unique nature of all credit unions, large and small.

They acknowledge their accountability to the credit union system (stakeholders) in their communication efforts and their stewardship of credit union resources.

This was the culture developed in the three decades following deregulation. These are only a few of many mutual efforts that had characterized this most critical cooperative system relationship in this period.

That mutual respect  is what was lost during the Great Recession and is missing in NCUA’s approach to its role today.

From the 2000 Annual Report

Student Internship Program

The OCDCU 2000 College Student Summer Internship Program was the most successful to date. The program creates partnerships between low-income designated and other credit unions (large or small) and college juniors and seniors to train and develop a pool of potential future credit union managers. The students selected are business, finance or marketing majors.

With technical assistance grant stipends, the 2000 summer intern program matched 29 college student interns with 58 different credit unions. Stipends provided the interns totaled $72,500 in 2000 compared with $67,500 in 1999 for 27 students.  Pg 16

National Small Credit Union Program

The NCUA Board adopted the National Small Credit Union Program (NSCUP) in March 1999. The NSCUP exists to:

  • Promote credit union service to people of modest means;
  • Increase access to credit unions for individuals in underserved communities by fostering a regulatory environment where small, newly-chartered and low-income designated credit unions can provide appropriate and needed services to members;
  • Promote successful, financially healthy small credit unions through appropriate technical and financial assistance; and,
  • Facilitate a regulatory environment that empowers small credit unions.

Nearly 500 credit unions voluntarily participate in the program. The NCUA has committed 74 field staff — 13 economic development specialists (EDS) and 61 small credit union program specialists (SCUPS) — located throughout the nation to carrying out the NSCUP objectives.

These specialists focus on increasing access to credit unions and credit union management development through training and mentor relationships. Recognizing the uniqueness of small credit unions and the necessity to maintain an informed staff, OCDCU conducted two EDS/SCUP training workshops during 2000. The workshops focused on increasing access to credit unions, business development, information technologies and alternative capital sources.

Reducing the Operating Fund’s Balance

The 2000 budget projected a $7.4 million net loss to the Operating Fund as the agency continues efforts to reduce the fund balance. However, because of budget savings from vacant staff positions, the net loss for 2000 was approximately $4.1 million. As a result, the Fund balance at year-end 2000 was $2.2 million.  Pg  31 (note: it was $136.3 million at December 2020)

From the 2001 Annual Report

The Board itself demonstrated its commitment to more responsive accountability for agency operations and finances by conducting NCUA’s first ever Public Forum and Budget Briefing, which resulted in stakeholders having a better understanding of the agency’s budget and operations.

Likewise, the NCUA initiated an internal Accountability in Management self-study, which presented opportunities to streamline operations, reallocate resources and improve the overall efficiency of the agency. These important initiatives are being implemented and will remain a high agency priority in 2002.  Pg 5

As part of NCUA’s strategic planning and as requested by Chairman Dennis Dollar, via his Accountability in Management (AIM) initiative, all areas of agency operation are being reviewed to determine efficiency and effectiveness. NCUA’s 2002 budget incorporated many recommendations attributed to that purpose and one result was the consolidation of several central offices.

Consolidation coupled with regional staff reductions, due in large part to the new flexible examination schedule, results in a projected 3.4 percent reduction in staff by the end of 2002 and positions the agency to achieve at least a 4 percent staff reduction by the end of 2003.

Just as the credit unions NCUA regulates and insures continually plan for the future, we will continue to review both the central and regional office structure with an eye toward boosting efficiency and saving cost. We expect many cost saving changes in 2002 — risk-focused examinations, flexible examination scheduling for qualifying credit unions and accountability in management initiatives — will result in an improved examination program and continued good stewardship of agency resources. Pg 8.

In the Future

During my first year as executive director, we made a commitment to establish open, frequent lines of communication with NCUA’s stakeholders. Chairman Dennis Dollar’s groundbreaking idea to conduct NCUA’s first open budget briefing and public forum provided an excellent opportunity for timely, direct input from our key stakeholders. Due to the success of this approach, you can be assured that NCUA will remain committed to providing open forums for gleaning input, which allows for an optimal decision-making environment

NCUA News was produced by PACA and sent to more than 10,000 credit unions and related organizations. NCUA News is often the voice of NCUA for credit union officers and volunteers, those who need to know what is happening in and around the agency. Responding to media inquiries, issuing press releases, advancing media contacts, writing the NCUA News and Inside NCUA, an internal newsletter for NCUA staff, monitoring and updating the NCUA web site and producing the annual report comprise the core public affairs responsibilities of PACA.  Pg 11

Small Credit Union Program

The Small Credit Union Program (SCUP), which is monitored by OCUD, is operated by the regions to promote successful, financially healthy small credit unions (those under $5 million in assets; in operation less than 10 years with under $10 million in assets; or low-income designated credit unions). This is accomplished through appropriate use of technical and financial assistance (e.g., on-site contacts and workshops).

The NCUA Board has committed 78 specialists —17 economic development specialists and 61 small credit union program specialists—to this program. There are 4,381 credit unions that fall within the SCUP criteria that are eligible to participate in the program. At December 31, 2001, there were 721 credit unions participating in the program. During 2001, the regional specialists performed 705 on-site visits providing one on one, on-the-job training.

Another aspect of SCUP is group training, where germane topics are addressed with program credit union officials and staff members. Outreach was in high gear during 2001, with the regions completing 43 workshops. More than 2,100 credit union officials attended these workshops.  Pg 16



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