NCUA Makes Two Temporary Changes to PCA Requirements

The National Credit Union Administration (NCUA) Board on May 21 approved an interim final rule making two temporary changes to its prompt corrective action (PCA) requirements for credit unions that become less than well capitalized..

This interim rule temporarily reduces the earnings retention requirement for credit unions classified as adequately capitalized. For those credit unions that do not meet the earnings retention requirement, they will not have to submit a written application requesting approval to decrease its earnings retention amount. But if a credit union poses an undue risk to the National Credit Union Share Insurance Fund or exhibits material safety and soundness concerns, the appropriate NCUA Regional Director may require the credit union to submit an earnings transfer waiver request.

The interim final rule temporarily permits an undercapitalized credit union to submit a streamlined net worth restoration plan, demonstrating that the reduction in capital was caused predominantly by share growth and that this is a temporary condition because of the pandemic. However, if a credit union becomes less than adequately capitalized for reasons other than share growth, they must still submit a net worth restoration plan under the current requirements in NCUA’s regulations.

The NCUA Board believes that these amendments will provide federally insured credit unions with additional flexibility without jeopardizing the safety and soundness of the credit union system.

The interim final rule will become effective once it is published in the Federal Register.

These temporary changes will be in place until the end of 2020.

Read the interim final rule.

Fewer Problem CUs During the First Quarter of 2020, NCUSIF Reserves Up

The number of problem credit unions fell during the first quarter of 2020, according to the National Credit Union Administration (NCUA).

There were 175 problem credit unions at the end of the first quarter of 2020. In comparison, there were 190 problem credit unions at the end of 2019.

A problem credit union has a composite CAMEL rating of 4 or 5.

Shares (deposits) in problem credit unions declined from $9.7 billion at the end of 2019 to $9.4 billion, as of March 2020. At the end of first quarter of 2020, 0.77 percent of total insured shares were problem credit unions compared to 0.79 percent of total insured shares at the end of 2019.

Most problem credit unions were small credit unions.

NCUA reported that almost 88 percent of the problem credit unions have less than $100 million in assets, while 1.7 percent of problem credit unions have more than $500 million in assets.

However, almost 45 percent of insured shares in problem credit unions were in credit unions with $500 million or more in assets.

In addition, NCUA stated that reserves at the National Credit Union Share Insurance Fund increased during the first quarter of 2020 from $117 million to $177.7 million.

NCUA's Hood Discusses the Process for Selling Off Taxi Medallion Portfolio

National Credit Union Administration (NCUA) Board Chairman Rodney Hood on September 25 provided more insights into the agency's process in selling off its tax medallion portfolio it assumed from failed credit unions.

Addressing the Credit Union National Association Government Affairs Conference, Chairman Hood commented that NCUA evaluated a number of options, but came to the determination that a singular bulk sale would be in the best interest to the National Credit Union Share Insurance Fund.

Hood told the audience that NCUA received bids for a portion of the medallion portfolio from interested bidders, but concluded that the sum of the subset bids were less than the bids for the overall portfolio.

He noted that NCUA in consultation with its financial advisors reached out to 23 firms with experience in handling distressed commercial assets. Six of these firms submitted bids. NCUA allowed two firms go through to the final due diligence bid round and received two independent offers. The agency turned away some firms because it lacked confidence that the firms would treat borrowers in a fair way.

Hood cautioned credit unions that "[h]olding these medallion assets beyond a reasonable period" could result in the agency repeating past mistakes. The past mistake is referencing the properties in Florida that were assumed by NCUA with the failure of Norlarco and Huron River Area Credit Unions.

Read the speech.

NCUA's McWatters Defends Selling Taxi Medallion Portfolio

At the Credit Union National Association's Government Affairs Conference, National Credit Union Administration (NCUA) Board Member McWatters on February 24 defended the agency's decision to sell its portfolio of taxi medallion loans.

McWatters was responding to criticism the agency should have waited for a possible initiative from the New York Taxi Workers Alliance to form a public/private partnership to purchase the agency’s medallion loan portfolio.

However, McWatters stated that postponing the sale would have been inappropriate.

McWatters claims that if the agency postponed the sale, it would have lost the winning, least cost bidder.

The winning bidder, Marblegate Asset Management, was ready, willing, and able to close on the transaction, according to McWatters.

Postponing the sale would have most likely resulted in additional material losses for the National Credit Union Share Insurance Fund (NCUSIF), which would cause NCUA to "forgo distributions to credit unions for the intermediate future, if not longer."

McWatters told the crowd that NCUA "retained the services of outside consultants and investment advisors who assisted us in developing a plan to sell the taxi medallion loan portfolio pursuant to an open and transparent auction process."

In addition, McWatters addressed the topics of credit unions acquiring community banks and credit unions maintaining adequate capital and liquidity levels.

Read the speech.

NCUA Completes Bulk Sale of Taxi Medallion Loans (updated at 8:19)

The National Credit Union Administration (NCUA) on February 19 announced the sale of the majority of its taxi-medallion loan portfolio to Marblegate Asset Management LLC.

After thorough research and careful consideration, NCUA determined this sale was the most appropriate action to meet its statutory obligation under the Federal Credit Union Act to achieve the least long-term cost to the National Credit Union Share Insurance Fund.

NCUA’s holdings included medallion loans from Melrose Credit Union and LOMTO Federal Credit Union, which supported the New York City taxi industry for nearly a century until their liquidations in 2018.

NCUA determined a single bulk sale was the best option to meet its statutory requirements and prevent any unnecessary volatility in the already stressed taxi medallion market.

The agency did not disclose the sale price.

However, the Wall Street Journal (subscription required) is reporting that Marblegate Asset Management was nearing a deal to buy almost 4,500 medallion loans for around $350 million, according to unnamed sources.

Read the press release.

Read the FAQ.

IG: Examiners Could Have Done More to Detect Fraud at C B S Employees FCU

The National Credit Union Administration's Inspector General (IG) is critical of examiners for losses to the National Credit Union Share Insurance Fund (NCUSIF) arising from the failure of C B S Employees Federal Credit Union.

According to the Material Loss Review, the failure of the credit resulted in an estimated loss of $39.5 million to the NCUSIF.

The IG determined that the failure was due to the misappropriation of $42.2 million in cash, due to fraud. The credit union's former CEO concealed the losses by understating member share balances, primarily share certificates, on the financial statements. The embezzlement occurred unabated for almost 20 years.

The IG noted that the lack of segregation of duties and dual control allowed the former CEO to perpetrate and conceal the fraud. The former CEO possessed all of the following:

• Access to official credit union checks, which enabled him to alter the physical records of credit union checks;
• "Super-user" access to the credit union's accounting system, which enabled him to alter both the check payee information and file maintenance reports, which concealed this action; and
• Sole responsibility for financial reporting, which gave him the ability to prepare fraudulent financial statements.

While the IG report stated that while examiners recognized the risk posed by the lack of segregation of duties, it did not result in a Document of Resolution or any other formal or informal enforcement action.   The IG believed that if these responsibilities had been separated, it would have been more difficult for the former CEO to perform the fraudulent activities.

In addition, if dual controls had been in place, credit union staff could have discovered the former CEO’s embezzlement long before they eventually discovered it.

Furthermore, the IG report noted that to perpetrate the fraud, the former CEO needed a reliable source of funds. The former CEO had authority to set interest rates on share certificates. For example, the former CEO set the interest rate on one-year share certificate at 3.1 percent as of December 31, 2018, which was significantly above the market rate of approximately 1.3 percent. Despite these above-market rates, the credit union reported approximately $3.5 million in share certificates at the end of 2018. This small dollar amount of share certificates given the above-market rates should have triggered questions among the examiners; but the IG found no evidence of this in their Examination Report.

Moreover, the IG concluded that the supervisory committee audits and member account verification procedures were unacceptable.

The IG made two recommendations, which National Credit Union Administration management agreed with. Management should:

• "revise examination procedures to prioritize assessing and developing a risk response for credit unions that do not segregate certain key duties and that require dual controls. These revisions should include a framework that examiners can complete an assessment of those characteristics that indicate lack of segregation of duties at a credit union and additional procedures that examiners should perform when a lack of segregation of duties is apparent";  and 
• "amend guidance related to member account verifications. Specifically, the amended guidance should require reconciliation from the print processor to the share and loan subsidiaries when a statement verification is performed."

Read the Material Loss Review.

OIG: NCUA Assisted in the Merger of an Alabama CU

In its Semiannual Report to Congress, the Office of the Inspector General (OIG) of the National Credit Union Administration (NCUA) reported that the failure of Monroe Education Employees Federal Credit Union (Monroeville, AL) imposed an estimated loss to the National Credit Union Share Insurance Fund of $335,530.

The credit union failed due to insufficient management, poor internal controls, recordkeeping errors, high loan delinquencies and charge-offs, and undercapitalization.

At the time of the assisted merger, Monroe Education Employees FCU had $4.4 million in assets and 1,578 members.

The failed credit union was merged with Gulf Winds Credit Union (Pensacola, FL) on July 29, 2019.

Read more.

38 Pages of Heavily Redacted Documents on Progressive-PenFed Merger

On January 7, 2019, I filed a Freedom of Information Act request with the National Credit Union Administration (NCUA) regarding the emergency merger of Progressive Credit Union (New York, NY) into Pentagon Federal Credit Union (McLean, VA).

Specifically, I requested 2018 agency records regarding 1) the merger application, agreement, and NCUA approval documents; 2) communications between the NCUA and potential credit union suitors of Progressive; and 3) internal NCUA communications of potential merger partners with Progressive.

On September 25, NCUA granted my request in part and denied it in part.

The agency did provide 38 pages in response to my request, which were heavily redacted, on the unassisted emergency merger between Progressive and Pentagon FCU.

NCUA wrote that the "[r]edacted and withheld information is exempt from FOIA release under one or more of the exemptions at 5 U.S.C. § 552(b)(4), (5), (6), and (8)."

NCUA did not provide any information on potential credit union suitors for Progressive Credit Union other than Pentagon FCU. .

One section of a September 18 letter to NCUA and the New York Department of Financial Services from Robert Familiant, CEO of Progressive, on Progressive's emergency required expeditious action and a lack of reasonably available alternatives for Progressive was totally redacted. What does the lack of reasonably available alternatives mean?

In addition, the September 18 letter stated that there were seven reasons why this emergency merger with Pentagon FCU was in the public interest. However, 3 reasons were totally redacted and parts of the other 4 reasons were partially redacted.

The partially redacted reasons that the emergency merger was in the public interest were:

• the merger would eliminate the risk of a loss to the National Credit Union Share Insurance Fund;
• the merger would benefit Progressive members by expanding products and services available to them;
• the merger would eliminate duplicate positions and expenses; and
• Pentagon FCU wanted to merge now.

The section in the application detailing the reasons for the merger were extensively redacted.

Outside of saying the merger was in both credit unions' best interest, the record was pretty thin on how the merger benefited Pentagon FCU or its members.

Another redaction was the analysis of the adequacy of Progressive's allowance for loan and lease losses.

The document further redacted other financial information including the combined financials after merger adjustments.

Troubling Proposal from NCUA

The National Credit Union Administration is proposing that an FCU will be required to develop and maintain a written plan if its public unit and nonmember shares, taken together with borrowings, exceed 70 percent of paid-in and unimpaired capital and surplus.

This proposal ignores that the reliance on volatile and expensive nonmember deposits and borrowed funds could expose the National Credit Union Share Insurance Fund (NCUSIF) to a loss.

For example, Beehive Credit Union, which failed, held up to 18 percent of its deposits in high-cost nonmember deposits. The Material Loss Review of this failure noted that these high-cost nonmember deposits partially contributed to the $27.6 million loss to the NCUSIF.

According to the Material Loss Review of Chetco Federal Credit Union. the credit union's management failed to develop an adequate liquidity plan to address rapid loan growth. The report noted that management funded its rapid loan growth through a combination of borrowed funds and deposit products with above-market rate. But as Chetco's financial condition deteriorated, a corporate credit union reduced its line of credit, subjecting the credit union to liquidity risk. The failure of Chetco resulted in an estimated loss to the NCUSIF of $76.5 million.

The NCUA Board should require all FCUs to develop and maintain written plans when an FCU is relying on high-cost, volatile nonmember shares and borrowings to fund its operations above a de minimis threshold.

NCUA Board Proposes Delaying Risk-Based Capital Rule by Two-Years

The National Credit Union Administration Board on June 20th voted on a proposal to delay by two-years the implementation date of its risk-based capital rule until January 1, 2022.

Currently, the risk-based capital rule was scheduled to go into effect on January 1, 2020.

NCUA staff stated that the delay would not pose undue risk to the National Credit Union Share Insurance Fund.

Also, the delay would allow the NCUA Board to examine whether asset securitization should be accounted for by NCUA's capital standards; whether certain forms of subordinated debt should qualify as capital for risk-based capital purposes; and whether a community bank leverage ratio analog should be integrated into NCUA's capital standard.

NCUA Chairman Hood stated that he intends to bring forth a proposed rule allowing subordinated debt count towards a risk-based capital standard by the end of this year.

NCUA further stated that the delay would benefit credit unions by allowing them to allocate resources to implementing the Financial Accounting Standards Board current expected credit loss (CECL) standard.

Moreover, the time delay would allow NCUA to direct additional time and resources toward modernizing its examination systems.

Board member McWatters and Chairman Hood voted for the proposal.

Board member Harper dissented to delaying the risk-based capital rule and voted no on the proposal.

Read the proposed rule.

NCUA to Pay $160.1 Million in NCUSIF Dividends during the Week of May 20

The National Credit Union Administration (NCUA) will pay $160.1 million in dividends to eligible credit unions from the National Credit Union Share Insurance Fund (NCUSIF) during the week of May 20.

NCUA stated that over 5,500 credit unions would be eligible for the distribution from the NCUSIF.

The NCUA Board approved the distribution in March after it was determined that the NCUSIF equity ratio of 1.39 percent at the end of 2018 exceeded the normal operating level of 1.38 percent.

This is the second distribution from the NCUSIF after the merger of the Temporary Corporate Credit Union Stabilization Fund into the NCUSIF.

Read the press release.

No Evidence that NCUA Asked for Authority to Curb Concentration in Taxi Medallion Loans

The National Credit Union Administration (NCUA) did not ask Congress for the authority to curb excessive speculative lending in taxi medallions, according to the agency's Office of Inspector General.

Speaking before an Oregon Credit Union CEOs in December 2017, NCUA Board Member Metsger stated that NCUA’s ability to curtail speculative taxi medallion lending was limited by a provision in the Credit Union Membership Access Act. Metsger noted that the Senate Report specifically mentioned taxi medallion lending as an example of loan activity that was exempt from the Member Business Loan (MBL) cap of 12.25 percent of assets.

The Office of the Inspector General wrote:

"We found no evidence of NCUA directly communicating a recommendation to congress to rescind or modify the exception to NCUA's Rules and Regulations Part 723 for aggregate MBL limits."

The Office of Inspector General concluded that such recommendations could have mitigated the loss to the National Credit Union Share Insurance Fund by slowing the growth in taxi medallion portfolios or diversifying lending practices at the three failed taxi medallion lending credit unions.

So why didn't NCUA make a recommendation to Congress?

Loss to NCUSIF Was $765.5 Million from the Failures of Bay Ridge FCU, LOMTO FCU, and Melrose CU

The National Credit Union Administration (NCUA) Office of the Inspector General (OIG) released its Material Loss Review on the failure of taxi medallion lenders Melrose Credit Union (Briarwood, NY), LOMTO Federal Credit Union (Woodside, NY), and Bay Ridge Federal Credit Union (Brooklyn, NY).

The report found that the aggregate loss to the National Credit Union Share Insurance Fund (NCUSIF) from the failure of these 3 credit unions was $765.5 million. The OIG estimates that the losses to the NCUSIF from the failure of Melrose CU and LOMTO FCU was approximately $726 million; but NCUA will not know the final cost until all assets are sold. The failure of Bay Ridge FCU resulted in a preliminary loss of $39.5 million to the NCUSIF.

The OIG determined the failures were due to: (1) significant concentration of loans collateralized by taxi medallions, (2) unsafe and unsound lending practices, and (3) weak Board and management oversight and inadequate risk management practices.

The report noted that all three credit unions qualified for an exception from the aggregate member business loan cap, because the credit unions were either chartered for the purpose of making member business loans or have a history of primarily making member business loans prior to September 1998.

As of June 30, 2018, all three credit unions had significant concentration in tax medallion loans.

• Bay Ridge FCU had approximately 40 percent of its loan portfolio in taxi medallion loans;
• LOMTO FCU had approximately 93 percent of its loan portfolio in taxi medallion loans, and
• Melrose CU reported almost 71 percent of its loan portfolio was made up of taxi medallion loans.

The report stated that the 3 credit unions failed to monitor and appropriately monitor loans to associated members, thereby increasing concentration risk. NCUA's Member Business Loan Regulation limits lending to associated members to 15 percent of net worth. Examiners noted several instances when the credit unions violated the associated borrower limit. Because the credit unions did not identify and document loans made to associated borrowers, the OIG wrote it is not clear how often the associated borrower regulatory limit was breached.

In fact, Melrose requested forbearance in regard to the associated borrower limitation in July of 2014, requesting the 15 percent limitation be increased to 25 percent. The forbearance request was formally denied in October of 2015. However, prior to the denial, Melrose had restructured and extended approximately $113 million in loans to two different associated borrower relationships exceeding the 15 percent concentration during 2015. A September 30, 2015 examination, these two associated borrower relationships accounted for approximately $177 million in loans.

The OIG found that the credit unions engaged in inadequate loan underwriting and monitoring of taxi medallion loans. Examples of inadequate loan underwriting included frequent failure to fully analyze financial information of borrowers, did not look at the borrowers' ability to repay the loan, risky loan terms, unsupported cash out refinancings, and failure to identify and account for modified loans as Troubled Debt Restructures.

All 3 credit unions had significantly underfunded their allowance for loan and lease losses accounts.

The OIG also reported that lending decisions were based on inflated market values for taxi medallions rather than on industry accepted best practices for loan underwriting.

The report found that the credit unions did not adequately respond to issues raised by examiners, including lending practices, concentration, liquidity, and overall risk management. Poor Board oversight allowed for weak risk management practices at the 3 credit unions to go unchecked. The report highlighted the credit unions' Board of Directors, specifically Melrose and LOMTO, exhibited a lack of urgency in addressing their rapidly decreasing financial position.

The OIG concluded that if examiners had acted more aggressively through formal enforcement actions for repeat document of resolutions, NCUA may have reduced the size of the loss to the NCUSIF.

The OIG made 3 recommendations to NCUA management to more effectively capture the concentration and other risks on a credit union’s balance sheet.

NCUA management should:

• institute a formal process to regularly identify, analyze, and document concentration risk issues in credit unions or groups of credit unions and develop appropriate thresholds for different concentrations that would require increased levels of risk mitigation.
• revise examination procedures to prioritize assessing and developing risk responses for credit unions with high levels of concentration risk. For repeated unresolved recommendations, informal enforcement actions should be escalated to formal enforcement actions.
• require examiners review credit unions’ lending procedures with respect to analyzing the ability of the borrower to meet debt service requirements.

NCUA agreed to the recommendations.

Read the Material Loss Review.

NCUSIF Assisted Mergers Lack Transparency

The National Credit Union Administration's response to questions about charges to the National Credit Union Share Insurance Fund (NCUSIF) associated with assisted mergers in the fourth quarter lacked illumination.

One slide in the NCUSIF presentation at the March National Credit Union Administration (NCUA) Board meeting showed charges for assisted mergers of $39.5 million during the fourth quarter.

The following are questions to a NCUA spokesperson and the spokesperson's response.

Q: What type of assistance did NCUA offer during the fourth quarter?

Q: Was the charge associated with the merger of Bay Ridge FCU into Island FCU?

A: Slide five of the Q4 2018 Share Insurance Fund report shows the aggregate charges for assisted mergers was $39.6 million for the year and $39.5 million for the fourth quarter. The NCUA posts assisted mergers on its Conservatorships and Liquidations page, but the agency does not make public details of the type or level of assistance in an individual merger.

Q: Will the Office of the Inspector General do an audit on this assisted merger?

A: “The Dodd-Frank Wall Street Reform and Consumer Protection Act obligates the NCUA OIG to conduct material loss reviews (MLRs) of credit unions that incurred a loss of $25 million or more to the National Credit Union Share Insurance Fund. In addition, Dodd-Frank requires the OIG to review all losses under the $25 million threshold to assess whether an in-depth review is warranted due to unusual circumstances.”

We will have to wait for the semi-annual report to Congress from the agency's Inspector General to see whether a material loss review is being conducted with respect to the NCUSIF assisted merger of Bay Ridge Federal Credit Union. The Brooklyn, New York-based credit union had significant exposure to taxi medallion loans.

NCUA Board Approves $160.1 Million Equity Distribution from NCUSIF

The National Credit Union Administration (NCUA) Board on March 7, 2019 approved a $160.1 million equity distribution from the National Credit Union Share Insurance Fund (NCUSIF).

This is the second largest distribution to credit unions in the history of the NCUSIF.

At the end of the fourth quarter of 2018, the NCUSIF equity ratio was 1.39 percent -- above the normal operating level of 1.38 percent set by the NCUA Board. To lower the equity ratio to the normal operating level, the NCUA Board made the decision to make an equity distribution from the NCUSIF.

Eligible credit unions will receive a payment in the second quarter of 2019.

A financial institution that filed a quarterly Call Report as a federally insured credit union for at least one reporting period in calendar year 2018 will be eligible for a pro rata distribution.

Read the press release.

Interdependency Risk and An Emergency Merger

The current narrative from the credit union industry is that the emergency merger of Progressive Credit Union (New York, NY) into Pentagon Federal Credit Union (McLean, VA) saved the National Credit Union Share Insurance Fund (NCUSIF) from the loss that would have arisen from the failure of Progressive.

However, an untold story is about the interdependency risk associated with credit unions trying to prop up Progressive CU.

As I previously pointed out, Progressive Credit Union received an exemption from the nonmember deposit cap in 2015.

A document From the National Credit Union Administration (NCUA) noted that Progressive CU in recent years primarily funded itself through nonmember deposits, which were all from credit unions.

As of December 2018, the number of nonmember accounts at Progressive were 246. These dollar value of these nonmember deposits were slightly more than $76.8 million. Nonmember deposits comprised almost 32 percent of total deposits and shares at Progressive.

In addition, Progressive CU had $52 million in uninsured shares and deposits, of which $36.25 million were nonmember deposits.

Under the scenario where Progressive CU was liquidated in an insured depositor payoff, these uninsured deposits would absorb losses before the NCUSIF.

It is possible that some credit unions that funded Progressive CU could have become impaired. But only NCUA would know if this is the case.

This emergency merger seems to have more to do with keeping losses at Progressive from cascading to other credit unions.

The NCUA needs to seriously examine this issue of interdependency risk within the credit union industry.

NCUSIF Equity Ratio Above Normal Operating Level at the End of 2018

The National Credit Union Administration (NCUA) on February 15 released the audited financial statements for the National Credit Union Share Insurance Fund (NCUSIF).

Below are some highlights from the report.

As of December 31, 2018, equity in the NCUSIF was $15.72 billion. The equity ratio for the NCUSIF was 1.39 percent, which was above the Normal Operating Level of 1.38 percent.

For 2018, there were eight credit union failures compared to 10 failures in 2017. The cost of these failures, or the estimated cost of resolution at the time of liquidation, for 2018 is $785.0 million compared to $24.4 million for failures that occurred in 2017.

The NCUSIF ended 2018 with Insurance and Guarantee Program Liabilities of $119.1 million to cover probable losses as compared with $925.5 million for the previous year-end. The decline in reserves were primarily due to the resolution of certain troubled credit unions.

At the end of 2018, specific reserves were $7.3 million. Specific reserves are identified for those credit unions where failure is probable and additional information is available to make a reasonable estimate of losses. General reserves were $111.8 million.

At the end of 2018, NCUA did not guarantee any line-of-credit to a third-party lender.

Additionally, the NCUSIF did not provide any indemnifications as part of merger assistance or purchase and assumption agreements with acquiring credit unions.

NCUSIF Reserves Fell in October to $116.7 Million

Insurance and Guarantee Program Liabilities Reserves for the National Credit Union Share Insurance Fund (NCUSIF) were $116.7 million, as of October 31, 2018.

Reserves for specific natural person credit unions were $7.9 million and general reserves were $108.8 million.

NCUSIF reserves were $156.2 million, as of September 30, 2018. Reserves for specific natural credit unions were $47.4 million, while general reserves were $108.8 million.

The NCUSIF did not recognize any insurance loss expense during the month of October 2018.

NCUSIF Normal Operating Level Lowered to 1.38 Percent

The National Credit Union Administration (NCUA) Board lowered the normal operating level for the National Credit Union Share Insurance Fund (NCUSIF) from 1.39 percent of insured shares to 1.38 percent of insured shares.

The NCUSIF normal operating level will be set by the NCUA Board between 1.20 percent and 1.50 percent, according to the Federal Credit Union Act.

NCUA stated that setting the normal operating level at 1.38 percent would insure that the NCUSIF equity ratio would not fall below 1.20 percent under a moderate recession scenario. If the equity ratio drops below 1.20 percent, NCUA would be required by law to assess premiums.

NCUA assumed that a moderate recession would cause a 13 basis point decline in the NCUSIF equity ratio.

NCUA estimates that the value of the NCUSIF's claim on the corporate estate is 2 basis points in a moderate recession, down from 4 basis points.

Finally, investment income to the NCUSIF fell as its investment portfolio shrank, because of the resolution of a large credit union. The estimated decline in the equity ratio was 3 basis points.

Read more.

Regulator Cites CU for Illegally Operating in California, NCUA Is Missing in Action

The California Department of Business Oversight issued a cease and desist order on November 29 against Indian Federal Credit Union (Santa Clara, CA) and Atri Macharla.

The state regulator found that Indian Federal Credit Union was operating in the state without first obtaining a certificate allowing it to operate as a credit union in violation of state law.

The cease and desist order requires Indian Federal Credit Union to stop operating or advertising as a credit union until the credit union has obtained a certificate from the commissioner.

Moreover, Indian Federal Credit Union advertises itself as a federal credit union. But there is no evidence of Indian Federal Credit Union on the National Credit Union Administration's website.

The National Credit Union Administration (NCUA) is the charterer and regulator of federal credit unions.

Also, federal credit unions are required to be insured by the National Credit Union Share Insurance Fund. However, the credit union's website makes no mention to deposit insurance.

So, why hasn't NCUA acted to block this credit union from operating?

Shouldn't NCUA be concerned about a credit union calling itself a federal credit union?

It is possible that NCUA is not aware of this institution calling itself a federal credit union.

But after this commentary, NCUA has no excuse for not acting.

Read the enforcement order.