CUNA Comment Letter

CUNA Supports Quarterly Call Reports for All Federally Insured Credit Unions

November 1, 2001

Ms. Becky Baker
Secretary to the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 2231-3428

Dear Ms. Baker:

On behalf of the Credit Union National Association, I appreciate the opportunity to comment on the National Credit Union Board’s proposal to require all federally insured credit unions to file quarterly call reports with NCUA. CUNA represents more than 90% of the nation’s over 10,300 state and federal credit unions. Our comments were developed under the auspices of the CUNA Examination and Supervision Subcommittee, chaired by Gary Wolter, with input from members of the CUNA Federal Credit Union Subcommittee, the CUNA State Issues Subcommittee, the CUNA Small Credit Union Subcommittee, as well as other credit union and league officials.

As part of the new Risk Based Examination Scheduling Program, the NCUA Board proposes to require all federally-insured credit unions, regardless of asset size, to file quarterly Financial and Statistical Reports (5300 reports) with the agency. Currently, NCUA does not require credit unions with assets of less than $50 million to file quarterly reports.

In conjunction with the change to quarterly call reports, NCUA is also proposing to amend its Prompt Corrective Action (PCA) rule to no longer require written notification to the agency and any relevant State Supervisory Authority of a net worth change under PCA. If the proposal becomes final, NCUA plans to implement the change for the March 31, 2002 quarterly call report cycle.

In general, CUNA strongly opposes additional reporting requirements for credit unions from any source as credit unions are already required to comply with a range of reporting requirements from a variety of agencies.

However, we endorse the agency’s flexible examination schedule, which CUNA has encouraged for some time. This examination schedule will have notable benefits for federal credit unions as well as the agency. Robust credit unions will, in general, be examined on an eighteen-month cycle, rather than on an annual basis. By extending the examination schedule for healthy federal credit unions, NCUA will be able to focus resources on problem areas and should be able to achieve reductions in the agency’s budget. This, in turn, should result in a lower operating fee for federal credit unions. Also, because the quarterly call reports will provide examiners with more timely information on all federally insured credit unions, NCUA expects that the ability of examiners to detect emerging problems will be enhanced.

NCUA’s proposal links quarterly call reporting and the agency’s ability to obtain more information on a consistent basis from all federally insured credit unions to its objective of focusing more thoroughly on risk and thus, utilizing an elongated examination schedule for healthy federal credit unions. CUNA supports the proposal as a means to achieve these ends.

Based on comments we received from credit unions and leagues, we are concerned about the impact of the quarterly call report requirement on small credit unions. A number of them have expressed to us their apprehension about the additional burden they would shoulder if reporting requirements are expanded from two to four each year.

We do not think these concerns should be dismissed without full consideration of such concerns and options designed to facilitate compliance for both the agency and credit unions.

CUNA’s Small Credit Union Subcommittee, chaired by Donald Larsen, recommends that NCUA improve the reporting process by minimizing 5300 format changes and providing credit unions return reports on a more time-sensitive basis.

Other recommendations include developing a 5300 EZ for smaller credit unions, which would allow less complex institutions to complete and file a simplified form. NCUA could post the traditional 5300 call report on its website so credit unions could download it if they need to use the regular 5300 form.

Other options include facilitating credit unions’ ability to file electronically or to color-code the 5300 call report so credit unions are directed to review and complete the portion of the report that applies to their operations. Undoubtedly, there are several other approaches NCUA could take to ease the compliance burden for small credit unions concerning this proposal, and we urge the agency to explore these recommendations fully.

In a matter closely related to this proposal, CUNA strongly supports flexible examination schedules for well-managed state credit unions. CUNA President and CEO Dan Mica has written to NASCUS Chairman James Forney to urge the state regulators to work with credit union leagues to ensure healthy state credit unions have flexible examination schedules available to them, even if state regulatory or statutory changes are necessary to bring this about.

Thank you for the opportunity to comment on this proposal, which if adopted, will have notable ramifications for NCUA and credit unions. Please feel free to contact me if you have any questions about our comments.

Sincerely,

Mary Mitchell Dunn
CUNA Associate General Counsel