NCUA raps integrity, high fee income at El Paso’s
Sept. 6, 2013 – NCUA’s highly redacted material loss review of the now-defunct El Paso’s FCU points to a lack of management integrity and total fee income that far exceeded that of peers as key contributors to the credit union’s insolvency.
NCUA liquidated the 1,035-member federal credit union, which had $5 million in deposits, last year. The NCUA Office of Inspector General completed the material loss review to:
- determine the cause of the credit union’s failure and the resulting multi-million-dollar loss to the National Credit Union Share Insurance Fund;
- assess NCUA’s supervision of the credit union; and
- provide suggestions or recommendations to prevent future losses.
The report says the credit union’s senior management failed to manage “in the best interest of its members.” It adds that the institution’s fee income greatly exceeded that of its peers and notes operation irregularities, recordkeeping deficiencies and board oversight and governance issues.
OIG also said NCUA examiners could have mitigated much of the loss to the NCUSIF if they had more aggressively addressed these problems. It also provided recommendations to prevent future losses, including:
- implementing a comprehensive strategy for identifying and responding to fraud risk triggers,
- revising the agency's Red Flag Questionnaire to capture emerging trends in credit union fraud and trends throughout the industry as a whole, and
- updating policies and procedures to require third-party confirmations for all accounts where the balance or activity is significant to the operations of the credit union.
Material loss review of El Paso's FCU