Hyland To AICPA: Credit Unions Remain Sound
October 21, 2008, Alexandria, Va. – National Credit Union Administration Board Member Gigi Hyland discussed the state of the credit union industry, congressional and regulatory responses to the financial crisis, and current examination issues before the AICPA National Conference on Credit Unions yesterday in San Francisco, Calif. Attendees at the conference included certified public accountants from accounting firms, internal auditors and credit union CFOs and CEOs.
“The nation’s economy and, specifically, the financial services industry finds itself in a dynamic and fluid situation,” Board Member Hyland said. “The financial condition of credit unions remains sound as evidenced by continued high net worth levels. That said, credit unions are not immune from the ripple effects of the credit freeze and subprime mortgage crisis."
Board Member Hyland noted that credit unions must remain vigilant in their asset-liability management and liquidity management planning to weather the current crisis. She outlined recent congressional and regulatory actions that have been taken to respond to the crisis, including:
- Passage of the Continuing Resolution, which lifts the Central Liquidity Facility's (CLF) borrowing cap to full statutory authority of $41 billion;
- Passage of the Emergency Economic Stabilization Act that increases federal share insurance coverage to $250,000 and provides NCUA a consultative role with other regulators to determine how the Troubled Asset Repurchasing Program (TARP) will work;
- New NCUA rules that align NCUA’s share insurance rules with the new law as well as with the FDIC's efforts;
- A new NCUA rule that provides a guarantee on corporate credit union unsecured debt obligations to align with the FDIC's efforts; and
- An intense public awareness campaign that highlights federal share insurance protection.
Board Member Hyland also touched upon key examination issues for this year. She outlined the guidance NCUA has provided to credit unions on due diligence and noted, "Credit unions need to partner with vendors to effectively serve members. However, credit unions must take the time to understand what they are buying from a vendor, to implement programs slowly and to monitor and manage the risks associated with the implementation of new products and services."
During the half-hour question and answer portion of her presentation, Board Member Hyland responded to a variety of questions on the health of the corporate credit union system and usage of the CLF.
"Several corporate credit unions have been impacted by the market dislocation and this has challenged liquidity management. Credit unions should contact their corporates with any questions but should also consider using the CLF as an alternate liquidity source for their borrowing needs while this market crisis continues."
In her concluding remarks, Board Member Hyland underscored the value of accounting professionals providing their expertise to credit unions
"Not so long ago, economic turbulence and distress gave birth to a system of cooperative finance in this country known as the credit union movement. Next year, NCUA will celebrate the 75th anniversary of the Federal Credit Union Act. Today we live in different but equally challenging times. With these challenges come opportunities for credit unions to serve and meet all aspects of their members’ needs. Your continued belief in credit unions as an important part of the financial services industry and your willingness to provide professional advice and guidance to credit unions remain critical during these times of economic turmoil,” Hyland stated.
The National Credit Union Administration charters and supervises federal credit unions. NCUA, with the backing of the full faith and credit of the U.S. government, operates and manages the National Credit Union Share Insurance Fund, insuring the accounts of nearly 89 million account holders in all federal credit unions and the majority of state-chartered credit unions. NCUA is funded by credit unions, not federal tax dollars.
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