Proposed NCUA impacts state-chartered credit unions

August 10, 2012 at 2:34 pm 1 comment

The National Credit Union Administration (NCUA) announced a new rule in late July that would allow the federal regulator to designate a state-chartered credit in “troubled condition.” This would occur if the federal or state regulators assigned a CAMEL 4 or 5 rating– which would be a low score on the rating system used to evaluate the safety and soundness of credit unions– on either the financial risk or risk management of a credit union. Essentially this means that the federal rating could take precedence over the state rating.

Leaders of state-chartered credit unions, including the National Association of State Chartered Credit Union Supervisors (NASCUS), contend that this kind of preemptive action by NCUA threatens the validity and viability of the state charter. NCUA, which is under pressure from Congress to increase oversight, says that it wants to create a unified way of identifying credit unions that are in trouble.

Already, the NCUA has acted with a heavy hand here in North Carolina by breaking with the state regulator, the North Carolina Credit Union Division (NCCUD), and performing its own examinations of all state-chartered credit unions. In the past, the state issued exams were the primary exams for state-chartered credit unions, with NCUA only stepping in when it was deemed necessary, which was not very often.

Creating additional burdens on state-chartered credit unions will have significant impacts on the dual charter system. Many of North Carolina’s state-chartered credit unions are considering converting to a federal charter just to avoid the burden of dual examinations.  In addition, state and federal regulators already disagree on ratings 2-4 percent of the time. The NCUA’s proposal for a new system that could potentially override the state regulators will cause further confusion.

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Entry filed under: Credit Unions. Tags: .

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