ALEXANDRIA, Va. – NCUA yesterday amended its definition of "troubled condition" and CUNA is concerned that the change could have an adverse impact on the dual charter system.
"The dual chartering is significant and worthy of being preserved because it facilitates credit union growth and member service by allowing a credit union to determine which regulators, state or federal, facilitate its operations better," said CUNA President/CEO Bill Cheney.
"With this new NCUA rule, the federal agency could overrule a state regulator regarding a fundamental authority, the power to determine a credit union's CAMEL safety and soundness rating, even though limited to CAMEL 4 or 5 ratings," Cheney said.
The final rule amends the definition to allow either the NCUA or state regulators to declare a federally insured state-chartered credit union (FISCU) with a CAMEL 4 or 5 rating to be in "troubled condition."
Under the previous definition, only a state supervisory authority could make that determination for a FISCU.
At the Thursday open meeting, the NCUA said it will not make a "troubled condition" declaration without first making an on-site visit to the credit union in question. Agency staff noted that the amended rule expands the NCUA's ability to act preemptively to ensure that the officials who take control of a FISCU in "troubled condition" are qualified to address its troubles, thus providing the National Credit Union Share Insurance Fund a further measure of protection against the risk of loss.
All 48 of the comment letters NCUA received on the proposed rule, including CUNA's, were opposed to it. Many said the rule represented "excessive federalism" and destabilized the dual charter system.
NCUA Chairman Debbie Matz countered that burdening the dual charter system is not the NCUA's intent. "The dual charter system works well, has worked well, and will continue to do so into the future," she said.
The rule goes into effect 30 days after its publication in the Federal Register.
CUNA’s summary of NCUA’s board meeting is available here.