NAFCU’s Comments to NCUA on Definition of “Troubled Condition”

September 28, 2012

Mary Rupp
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA  22314

RE: Notice of Proposed Rulemaking on Definition of Troubled Condition

Dear Ms. Rupp:

On behalf of the National Association of Federal Credit Unions (NAFCU), the only trade association that exclusively represents federal credit unions, I write to you regarding the proposed changes to the definition of a “troubled condition.”  NAFCU recognizes as important the issue the NCUA seeks to address and we support efforts to address those problems.  However, we urge the NCUA to ensure that this, and other proposals that grant the agency new powers, are justified and necessary.

The NCUA proposes to alter its regulations to allow the agency to identify a state-chartered, federally-insured credit union as being in “troubled condition.”  The purpose behind the change is to allow the NCUA to minimize CAMEL ratings discrepancies between the agency and state supervisory authorities (SSAs).  Expanding the definition, the NCUA argues, will enhance the likelihood that problems are addressed early by both the NCUA and SSAs.  

The NCUA, as the administrator of the National Credit Union Share Insurance Fund (NCUSIF), already does have significant authorities it can exercise in regards to state- chartered, federally-insured credit unions.  As the agency pointed out in the proposal, it is participating in significantly more joint examinations with SSAs; the NCUA, which previously only participated in joint examinations of credit unions with $500 million or more in assets, is now conducting joint examinations of credit unions with $250 million or more in assets.  Further, the number of joint examinations has increased to the point that the number of hours NCUA examiners are spending participating in joint exams has nearly doubled.  See Proposed Rule on Definition of “Troubled Condition.”  77 Fed. Reg. 45,285, 45,286 (July 31, 2012).  Thus, the NCUA already has considerable authority to take steps necessary to protect the share insurance fund.  

If the agency finds that this authority is absolutely necessary, it should take care, in any final regulation, to clearly articulate its justification for this expanded authority.  The agency should also explain the specific statutory authority for the expanded powers, and as a general policy, NAFCU urges the NCUA – before proposing rules to expand its authority – to carefully consider whether there may be other, less costly options available that will enable the agency to achieve the same ends.  

NAFCU appreciates the opportunity to comment on the proposed rule.  Should you have any questions or require additional information please feel free to contact me at or (703) 842-2268.


Tessema Tefferi
Regulatory Affairs Counsel

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