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NCUA's 2011 Annual Report

The National Credit Union Administration (NCUA) released its 2011 Annual Report the week of July 2, 2012. Several issues are worthy of note:

  • The Health of the Credit Union System. The report shows that National Credit Union Share Insurance Fund’s net position grew 9 percent in 2011 to $10.8 billion and the failures at federally insured credit unions dropped by more than 40% from 2010 to 16 failures in 2011. The amount of total losses associated with credit union failures dropped 75% from $221 million in 2010. This provides further documentary evidence that credit unions do not need further safety and soundness rules from NCUA (or any other restrictions for that matter).     
  • Fair Lending Issues. The report notes that the number of fair lending violations increased during 2011. The report does not indicate by how much but there were 116 incidents reported involving fair lending issues in 2010.
  • NCUA’s “Regulatory Relief” Efforts.  “NCUA met or exceeded the requirements of Executive Order 13579 issued to ensure that independent regulatory agencies design cost-effective regulations to promote economic growth and job creation.  NCUA achieved these objectives by conducting regulatory reviews of regulations, inviting public participation, facilitating coordination with the other regulatory and State Supervisory Authorities, modernizing existing rules, targeting new rules to minimize compliance costs and increase publicly available data,” the report states. NCUA did take these steps, but many of them are required by law, such as seeking public comment on proposed regulations and regulatory reviews of current rules.  Also, in 2011 NCUA did not target new regulations to minimize compliance costs; the Interest Rate Risk final rule issued in February is the one notable example of a new rule with targeted applicability. The report cites the agency’s CUSO and loan participation proposals, both of which have been delayed by NCUA, as examples of “Regulating Credit Unions Responsibly.”
  • NCUA’s Examination Practices. The report indicated that agency tried to achieve “responsibly balanced examinations”.  While a growing number of credit unions in 2012 are indicating they are seeing improvements with their examinations, a smaller group of other credit unions are indicating that is not the case for them. 
  • NCUA Budget Issues. The report notes that it reduced the agency’s 2011 Operating Budget by $2 million, which is commendable and Credit Union National Association (CUNA) praised this step last summer. However, the agency still increased the budget for 2012 by over 5% and is likely to approve an increase for 2013, although it will likely be less than this year’s increase.  CUNA has repeatedly objected to the agency’s multi-year budget increases and will be following up further with key officials on both ends of Pennsylvania Avenue regarding greater oversight of NCUA’s budget.

CUNA’s Examination and Supervision Subcommittee is going through the NCUA Annual Report carefully and will be meeting with the agency by early fall to discuss concerns and recommendations for continued improvements.