SAN DIEGO–NCUA Board Member Rick Metsger said he is committed to having a vote on the potential closure of the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) when the board next meets, said he was surprised at one trade group’s opposition to the plan to close the fund, and indicated the agency is open to tweaking at least one piece of the proposed new rules around voluntary mergers.
Speaking to the NASCUS Summit here, Metsger said the closing of the TCCUSF has been the biggest issue the agency has been working on and one which he has received considerable feedback. His goal, he said, is to have a decision made prior to the end of the federal government’s fiscal year, Sept. 30. The NCUA board will meet on Sept. 28 and Metsger said the item will be on the agenda. If the vote is in favor, NCUA will be conduct an audit and then seek to declare payouts to CUs in 2018.
“I want to remind credit unions and regulators as well that there are still five days left on the comment period for closing the TCCUSF,” said Metsger. “I’m anxious to hear from anyone on that.”
Among those NCUA has heard from are CUNA and NAFCU, which have taken opposite positions on the TCCUSF closure (CUNA favors, NAFCU opposes). CUNA issued its statement as Metsger was taking the microphone at the NASCUS meeting.
Asked by CUToday.info during NASCUS’ Summit conference in San Diego whether he was surprised the two credit union trade groups have taken opposing positions on the proposal to close the TCCUSF, Metsger said he was “surprised” by NAFCU’s opposition to the plan.
The reason, he said, is that in November of 2016 NAFCU was asking NCUA to close the fund as soon as possible, but in its comment letter the trade group implied the process was being rushed.
Metsger said that in his travels to date and in the feedback he has received most credit union execs have expressed support for payouts from the fund in 2018.
“Going back to the financial crisis, no one expected to get a rebate and they didn’t even know how long their assessments were going to continue,” said Metsger. “To think that seven years later not only has there not been an assessment, they are going to get a rebate back. Most of the CEOs I talk to feel blessed the economy has turned out this well.”
Other issues addressed by Metsger:
NCUSIF Normal Operating Ratio
The NCUA board has proposed an increase in the NCUSIF’s normal operating ratio to account for increased risk presented by a merger with the TCCUSF. The current operating ratio is 1.26% and has been declining due to increased deposits at credit unions.
“When you look at the 1.26% status, you have to look at the potentiality of a recession, and the merger with the corporate stabilization fund—and most of the assets it holds aren’t cash–to make sure you have the liquidity to withstand events, including any substantial losses to the funds,” said Metsger.
Potential Risks to the NCUSIF
The biggest known risk to the NCUSIF at present is declining values of taxi medallions that are the collateral for a significant portfolio of loans made by a select number of CUs. With two banks planning to hold an auction of medallions they have repossessed, it will mean a new setting of the market value of medallions, said Metsger. That will mean credit unions will likely have to revalue that collateral, most likely down, which could lead to losses on the NCUSIF.
NCUA’s Proposal for Voluntary Mergers
“We’ve gotten lot of comments on that,” said Metsger, adding that the “biggest issue” has been around a component of the proposal that calls for members in credit unions going through voluntary mergers to be able to communicate with each other prior to the merger.
“We think there is some refinement that can be done there,” said Metsger. “Both Chairman (Mark) McWatters and I both agree there is a need for transparency in mergers, especially if there are insiders who are unduly enriched in the merger process. Transparency is important, and it’s everything we do. We hear that from the trades all the time. Well, it works both ways. If it’s a legitimate package you are putting together, you should be able to defend that to the membership.”
During the Q&A that followed, one CEO said her credit union has always done mergers the “right way” and supports disclosures, but expressed concerns that with 140,000 members the process of member communications could be onerous and time-consuming. Metsger said he is sensitive to that issue.
FOM Dashboard
Metsger said one of the things he is most excited about is a new dashboard that will allow CUs to track their charter change requests in real time online. “I’ve heard a lot about FOM issues with people asking, ‘Where is my request?’ Nobody seems to know.”