BIRMINGHAM, Ala.—Credit unions will make a serious mistake in 2016 if they don’t pay close attention to field of membership options, asserts Dennis Dollar.
The NCUA board in November unanimously approved a proposed field of membership rule that represents what Chairman Debbie Matz called the “most comprehensive” FOM reform in the history of the agency. The 160-page proposal, available in CUToday.info’s The Vault, here. was put out for a 60-day comment period in November.
Those changes, while not considered by many credit unions to be sufficiently far reaching, demand that credit unions understand the new rules, which will be finalized soon, and also learn how their states may react to the new guidelines, according to Dollar, principal at Dollar Associates.
States To Follow
“With NCUA’s new proposed FOM rules and a number of states likely to follow suit with membership eligibility changes of their own, 2016 should be a year for credit unions to take a serious strategic look at their FOM options,” said the former NCUA chairman.
Dollar pointed out that new risk-based capital requirements that will come into effect in 2019 will require CUs to hold more capital.
“And capital comes from earnings. And earnings come from the business of members who come from potential members that are a direct result of a workable and strategic field of membership,” said Dollar. “FOM should be a key evaluative issue for every credit union in 2016 because of the impact of new rules forthcoming, both at the federal and state levels.”
While Dollar credited NCUA for treating FOM as a crucial issue for credit union diversification and long-term financial stability, and for putting a great deal of time into the proposal that is a “positive step,” he said the agency could have been more aggressive with changes to the existing rule.
Dennis Dollar
Dollar said the proposal—if made a final rule in its current form—will only slow the migration of federally insured credit unions to more growth-friendly state charters.
Not Many Moves To Federal Charter
“I don't think, as proposed, that the rule will make very many—if any—state charters seriously consider converting to the federal charter,” said Dollar. “However, it may hold a few federals that really want a reason to stay with the federal charter for at least a few years. Most states have parity laws, however, and will track these changes at a minimum. Many states will, as they have for a number of years, go beyond the federal criteria. Ultimately, a statutory fix is needed to keep the federal charter competitive.”