NASCUS Urges NCUA to Reconsider its Proposed Troubled Condition Rulemaking

Jenny Champagne, VP, Regulatory Affairs and Government Relations
(703) 528-5974

October 1, 2012 – Arlington, Va. – NASCUS is convinced that the longstanding protocol between NCUA and state regulators regarding the regulatory classification of a state credit union to be in “troubled condition” does not need to change.  As such, NASCUS wrote in a September 28 comment letter, it cannot support the NCUA’s proposal.

“NCUA’s own proposal concedes that disagreement between the state and NCUA on a CAMEL rating that would determine whether a state credit union is in ‘troubled condition’ is exceedingly rare and occurs in less than 4% of all cases. NCUA has not asserted that a ratings discrepancy caused a material delay in supervisory action contributing to an increased loss to the NCUSIF,” NASCUS writes in the letter.   

In the comment letter, NASCUS asserts that the cooperation between NCUA and the states has worked for two decades.  NCUA’s proposed rule would forsake the longstanding protocol that properly recognizes the state regulator’s role as primary regulator for federally insured state-chartered credit unions (FISCUs) and would allow NCUA to unilaterally classify a FISCU to be in “troubled condition.”   As the federal insurer, NASCUS understands the NCUA has certain authorities and obligations with respect to FISCUs.  The rule as proposed is troubling, however, to NASCUS and state regulators, weakens the credit union system and is unnecessary for effective administration of the share insurance fund.

“NASCUS continues to take every opportunity to preserve state authority in the oversight of state-chartered, federally insured credit unions,” said NASCUS President and CEO Mary Martha Fortney. “A meaningful dual chartering system is essential for the future of a healthy credit union system, and from NASCUS’ perspective, NCUA has an obligation to preserve the dual chartering system, as weakening the dual system is itself a risk to the entire credit union system.”

NASCUS and state regulators remain committed to working with NCUA to mitigate material risk throughout the credit union system.

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