May/Jun 2010

What volunteers mean to credit unions

Simply put, credit unions could not exist without volunteers.

It’s hard to overstate the importance that volunteers play in our daily lives, especially those of us in the credit union industry. I’ve been reflecting a lot lately on the many ways our volunteers make a difference, and not just because NAFCU’s Volunteers Conference in San Antonio, Texas, is right around the corner.

As I write this column, our nation recently celebrated National Volunteer Week (April 18–24), which was created in 1974 when President Nixon signed an executive order to establish the week as an annual celebration of volunteering. Every president since then, along with many governors, mayors and other elected officials, has signed a proclamation promoting National Volunteer Week. 

This year’s theme, “Celebrating People in Action,” clearly reflects the credit union volunteers who remain in action each and every day in support of their credit union in these challenging economic times. Simply put, credit unions could not exist without volunteers.

On behalf of NAFCU, its board and staff, I want to thank America’s credit union volunteers and recognize the many ways they contribute to the remarkable success of the credit union community. Whether by setting policy for their credit union; serving on a committee; helping, in some instances, to run their credit union; or participating in our proactive lobbying activities, we owe all of our volunteers a great debt of gratitude.

Of course, one of the biggest challenges credit union volunteers face is staying up to speed on new legislative and regulatory developments impacting our industry. This has been anything but easy this year, with so many different issues to grapple with: the implementation of credit card legislation, prospects for sweeping financial industry reform, the potential for further constraints on overdraft programs; and the possibility of legislation imposing cramdowns and restricting interchange fees. Credit unions are also facing a plethora of regulations –– any one of which would be a full year’s work for any compliance officer!

Meanwhile, NCUA’s handling of the corporate stabilization and NCSIF assessments remains at the forefront of NAFCU’s focus. This is something that volunteers should be paying close attention to, especially those serving on credit union boards. In order for the NCUA to address this issue correctly, it will require consummate leadership, complete transparency and the utmost cooperation with the industry. NAFCU is continuing to work with NCUA to see this becomes a reality.

I cannot emphasize enough how important it is for credit union volunteers to understand what is at stake here. A fair number of credit unions are already below or hovering near the 7 percent level of being adequately capitalized. At the same time, NCUA is rightfully concerned about the increasing number of credit unions with CAMEL 4 and 5 ratings. It is also concerned about credit unions with CAMEL 3 ratings, particularly large credit unions where the cost of emergency merger or failure would be the highest.

Slapping a credit union that is below the adequately capitalized level with a large assessment poses great concerns for our industry. While NCUA has indicated that it recognizes this, NAFCU believes the agency should be just as concerned about a large assessment on credit unions that are at or above the adequately capitalized level. Such assessments could have a potentially crippling effect on the credit union industry.

In short, it is imperative that the agency take action to give those credit unions that are struggling to maintain an adequate ROA a “fighting chance.” Any assessment over 20-basis points in total for corporate stabilization and the NCUSIF only compounds the financial difficulties our industry is facing today.

Volunteers can help NAFCU make its case to NCUA about these concerns. By presenting the agency with a unified message, we can limit the negative impact of the assessments on credit unions. NAFCU is urging the NCUA to consider allowing the fund’s equity ratio to drop below 1.2 percent, being careful not to let it drop below 1 percent. The association is also urging the agency to utilize the full eight-year repayment period as authorized by law. 

On a positive note, first-quarter Call Report data suggest that the tide may be turning for some credit unions that have been facing difficult circumstances as a result of the economic downturn. While that is certainly good news, it would be a mistake to interpret that as a sign that we don’t need to stay involved in order for credit unions to prosper.

The bottom line: We simply cannot do what we have always done. And the extraordinary work of volunteers must come into play once again to ensure that this is the case.