Bluepoint’s VP Erin Coleman Attends Town Hall Meeting and Review of Part 704

Approximately 100 credit union industry leaders attended the National Credit Union Administration (NCUA) Town Hall Meeting in Orlando, FL. NCUA Chairman Debbie Matz presided, with additional executives from the agency participating in the discussion.  Each of the four primary areas in NCUA’s Proposed Changes to Part 704, otherwise known as the Corporate Credit Union (CCU) Stabilization Program, were reviewed and audience members were given a chance to ask questions, voice concerns and contribute ideas to the final regulation. The Town Hall meeting was held about five weeks before the end of the Comment Period for the Proposed Changes to Part 704.

NCUA began the meeting by explaining why it didn’t sell the “legacy assets” (e.g., securities, many of them backed by nonperforming mortgages) at the corporate and then assess fees to Natural Person Credit Unions (NPCU) at one time. In summary, the initial losses would have wiped out about half of the total net worth among all NPCUs. Not only would this have caused credit union failures, but it also would have prevented NPCUs from offering other services (e.g., making loans) to their members.

Part 704 addresses four key areas: Capital Standards, Asset Liability Management, Risk Concentration Limits and Governance. The NCUA explained that the proposed regulations are intended to identify problems such as lack of capital standards, rules about dealing with liquidity and the inability to move securities that contributed to the situation the industry faces today. At the same time, the proposed rules aim to create “never again” standards within a framework that protects consumers and NPCUs while offering CCUs sufficient opportunity to have a successful business model.

The three phases of the Stabilization Plan were reviewed. The first phase was Stabilization, which is complete and by all accounts was successful. The second phase is resolution of investment losses. The NCUA is currently working on that issue and plans to publish results shortly. The agency asked that NPCUs assume that this phase is complete when they send comments to the proposed Part 704 changes. The third phase is Reform, which was the topic of the February 3rd meeting, and includes rule making and the future CCU System.

Participants in the Town Hall Meeting echoed concerns found on the Comments page of the NCUA website, available for review here.