From expecting greater transparency from NCUA, to wanting more influence over the agency, to supporting NCUA’s expense decisions, CU CEOs weighing in on the regulator’s 2015 budget. Here’s a look at five views.
Where’s the Value?
NORTH HIGHLANDS, Calif.--Like many other CU leaders, Henry Wirz, CEO at the $2-billion SAFE CU in North Highlands, Calif., thinks NCUA needs to provide greater budget transparency. But for Wirz, there is an even bigger issue than the fact that the agency’s budget has increased more than 50% in five years. The real issue, he believes, is what do credit unions get for the money spent to underwrite NCUA.
“What are the standards of performance for NCUA? What are the objectives? Are they being achieved? Are they right objectives? How satisfied are the customers?” asked Wirz.
Wirz then addressed the rising cases of internal fraud, often at small credit unions.
“The reduction in exam time for credit unions under $10 million is one example of what I assert is misplaced priorities,” he said. “The most tangible result of that reduction in exam time appears to be a significant increase in fraud and losses to the insurance fund.”
Wirz pointed to NCUA’s strong emphasis on CUs effectively managing vendors, saying, “How do credit union’s manage NCUA? Unfortunately the credit union has no way to manage the vendor relationship and in general there is no clear accountability for NCUA.”
CEO Would Like To Examine NCUA
OAK HARBOR, Ohio--Thomas Renz, president at the $36-million Commodore Perry FCU, believes NCUA does not seem to feel, in any way, accountable to the industry it governs.
“And while they may not believe they are accountable, they could, at the very least, take the simple step of being open about what they are doing,” Renz stated.
Renz said that increased transparency would accomplish two important goals.
“First, assuming there is nothing to hide, it would reduce the level of mistrust between the regulator and the regulated,” said Renz. “Second, it could create an opportunity for the industry to offer solutions to NCUA that may increase efficiencies. In an industry based on cooperation, and where business ideas are so freely shared, this could be especially productive.”
Renz contended that if he were allowed to examine the NCUA budget, he’d find a number of ways to dramatically decrease costs. “Ultimately the NCUA’s feeling that it is not accountable to the community it polices results in a lack of motivation to be efficient. If the NCUA needs more money they simply increase their budget and our members ultimately pay for that. If we took this attitude with our members we would be out of business.”
‘A Credibility Gap’
ALCOA, Tenn.--David Proffitt, CEO of Alcoa Tenn FCU in Alcoa, Tenn., reminded what causes CU leaders such angst with NCUA budget increases—“Credit unions pay into the fund that pays the salaries and expenses of the NCUA.”
Since the 2015 budget was passed, Proffitt said he has been thinking about “all of the credit unions below $500 million in assets that struggle to have a healthy—or even positive—ROA to be able to expand and provide the products and services for their members. And they are paying for the excesses of the NCUA budget. NCUA has a creditability gap.”
McWatters’ ‘No’ Vote Appreciated
CHATSWORTH, Calif.--Aware that Board Member Mark McWatters voted “no” on all budget-related items at the open board meeting at which the 2015 budget passed on a 2-1 vote, and that he called for greater transparency behind budget decisions, Dale Verderano, CEO of the $146-million Matadors Community CU, Chatsworth, Calif., told CUToday.info that McWatters “brings a breath of fresh air to the NCUA board.
“It is about time we try to get total transparency in the agency,” continued Verderano. “Yes, a detailed accounting of each expense item in the budget is needed and to allow credit unions to comment prior to any finalization of the budget. This would allow for more understanding as to why there is any type of budget increase.”
NCUA Must Grow Budget So CUs Can Grow
MASSENA, N.Y.--Scott Wilson, CEO of $466-million SeaComm FCU, said that just as CUs grow their budget to support their mission, NCUA must do the same.
“In today’s business environment we need to put significant resources in place in order to support our on-going initiatives in order to grow our credit unions,” said Wilson. “NCUA is part of that process and too needs to do the same so that they too can be relevant. I can absolutely appreciate where Chairman (Debbie) Matz is coming from in terms of having examiners specialized in areas such as capital markets, MBL and IT/cyber-security.”
Wilson said he appreciates when an examiner comes on-site possessing the specific knowledge to understand areas that are key to balance sheet management strategy, particularly in areas such as investments.
“We are very savvy in our overall product mix and want to continue to diversify in order to squeeze as much yield as we can, while at the same time manage our interest rate risk,” said Wilson. “As an example, taxable municipal bonds. If an examiner has no understanding on the intricacies of those types of investments, it makes it very difficult to explain why they are good sound investments for credit unions to make.
“Conversely, an examiner who has that experience will come in take a sample of bonds in the portfolio, ask specific questions to ensure you are performing your due-diligence on the pre-purchase side, on-going monitoring, and interest rate risk,” noted Wilson. “I want examiners to grow their expertise to go along with the ever-changing business landscape of what our credit union is doing.”
‘Misshapen In Purpose’
RALEIGH, N.C.--Jim Blaine, CEO of the $27-billion State Employees' Credit Union here, the nation’s second-largest natural-person CU, succinctly summed up where he stands on the agency’s new budget.
“NCUA’s 2015 budget is misshapen in purpose, historically inaccurate, financially unconvincing, and strategically incoherent. Other than that, I have no problems with the new budget.”