NCUA reported that the number of problem credit unions increased in September, while assets and deposits (shares) in problem credit unions fell.
A problem credit union has a CAMEL rating of 4 or 5.
At the end of September, there were 384 problem credit unions – a net increase of 15 during the month. This is the highest number of credit unions on the problem list so far this year.
According to the NCUA, there were 9 credit unions with over $1 billion in assets on the problem list -- down from 10 in August. However, 4 credit unions with between $100 million and $500 million in assets, 7 credit unions with between $10 million and 100 million in assets, and 5 credit unions with under $10 million in assets were added to the problem list.
Assets and deposits in problem credit unions as of the end of September were $33.9 billion and $30.4 billion, respectively. This was down from $34.8 billion in assets and $30.9 billion in deposits in August. The percentage of the industry's assets and shares in problem credit unions were 3.4% and 3.88% as of September.
The decline in assets and deposits in problem credit unions in August can be attributed to one $1 billion plus credit union no longer being rated as a CAMEL 4 or 5. The removal of this credit union from the problem list more than offset the increase in assets and deposits at the 16 credit unions that were added to the problem list.
So are these numbers bad, or good?
ReplyDeleteTo make that determination, a relative comparison is needed. FDIC reports more than twice as many "Problem Institutions" on the bank side, so it might be argued banks are 100% worse than credit unions, given the same national economic conditions.
Nice that NCUA has the kind of transparency that lets you report those numbers, especially given the opacity and lobbyist-engineered cloak of darkness in bank world; The OIG at FDIC no longer has to report bank losses under $200 million in its semi-annual report to Congress, and problems at systemically important large banks go unreported because it is in the national interest. Hide everything small and everything big? Really?
There are more credit unions with problems of a potentially criminal nature than you realize, having just left one. Maybe if you posted contact information for investigative reporters willing to look into it, you'd be better able to see what's under the rug.
ReplyDeleteHere is what Dodd Frank Act says:
ReplyDeleteThe term ‘material loss’ means any estimated loss in excess of—
‘‘(i) $200,000,000, if the loss occurs during the period beginning on January 1, 2010, and ending on December 31, 2011;
‘‘(ii) $150,000,000, if the loss occurs during the period beginning on January 1, 2012, and ending on December 31, 2013; and
‘‘(iii) $50,000,000, if the loss occurs on or after January 1, 2014, provided that if the inspector general of a Federal banking agency certifies to the Committee on Banking, Housing, and Urban Affairs of the Senate
and the Committee on Financial Services of the House of Representatives that the number of projected failures of depository institutions that would require material
loss reviews for the following 12 months will be greater than 30 and would hinder the effectiveness of its oversight functions, then the definition of ‘material loss’ shall be $75,000,000 for a duration of 1 year
from the date of the certification.’’
Dodd Frank also raised the threshold for reporting material losses to the NCUSIF from $10 million to $25 million. Specifically, the Act defines a material loss for the NCUSIF as (A) $25,000,000; and (B) an amount equal to 10 percent of the total assets
of the credit union on the date on which the Board initiated assistance under section 208 or was appointed liquidating agent.
Another large problem is that credit unions with business lending departments often don't have employees with the requisite skills and background in those departments for that kind of financial service.
ReplyDeleteThere are credit unions with glorified tellers employed in business lending departments, and this doesn't raise a red flag for NCUA. I heard that the NCUA examiners who specialize in business lending are even more incompetent, so maybe that explains things.
Sooner or later, NCUA is going to be outed for turning a blind eye to circumstances they should have demanded changes to.