RALEIGH, N.C.-NCUA's plans to introduce on Jan. 1 a new Office of National Examinations and Supervision (ONES) has at least one of the four $10-billion-plus CUs that fall under ONES' supervision wondering what the regulator's intent is.

NCUA introduced ONES, saying it is seeking to better allocate resources to address areas of greater risk ("NCUA Creates Office To Examine Largest CUs," CU Journal, July 26). The new office will oversee the nation's largest natural-person credit unions-those over $10 billion in assets-and also assume supervision of corporate credit unions. Just four natural-person CUs are larger than $10 billion in assets: Navy FCU, Pentagon FCU, North Carolina State Employees' CU and BECU.

A fifth credit union, SchoolsFirst in Santa Ana, Calif., may surpass that asset threshold by the time the new office is in operation.

In introducing the new office, NCUA Chairman Debbie Matz said the objective is to better align examination resources with the biggest risks to the NCUSIF. But not everyone agrees.

"What in the devil is going on, and what is causing this?" asked Jim Blaine, CEO of North Carolina's State Employees Credit Union, the second largest CU in the country. "I think all of the $10-billion-plus credit unions would like to understand. We are a supporter of NCUA, and we want a strong regulator. However, SECU writes big checks when things go wrong (in the CU industry). It will cost this credit union's members a quarter of a billion dollars for the corporates. We think we should at least have had some knowledge of this office (before it was announced) and why decisions are being made."

Blaine, who has had a strained relationship with NCUA centering on a dispute over the $25-billion CU's disclosure of its CAMEL code, said he did not have any inclination the new supervisory office was coming. He added that he hoped NCUA would have first assembled together the four $10-billion-plus CUs and agency representatives.

"They could have advised us this was coming, gotten our input, discussed the opportunities, where the problems might be, and it would be a collaborative thing," said Blaine. "I think we got a call from NCUA the evening of July 26, after the announcement from NCUA, asking if we might be available for a conference call with (NCUA Director of Examination and Insurance) Larry Fazio."

How Four CUs Were Notified

When asked about its approach to notifying the four largest credit unions, NCUA Public Affairs Specials John Fairbanks stated that the agency contacted the four CUs immediately following the announcement, which was made during NAFCU's annual meeting.

"We contacted them in order to discuss the forthcoming changes in supervision resulting from the creation of the new office. The changes in supervision become effective January 1, 2014, giving these credit unions sufficient time to transition to the new office. The agency is committed to maintaining an open and ongoing dialog with the credit unions that ONES will supervise."

NCUA representatives also told Credit Union Journal that the agency has reached out to state regulators in Washington State, where BECU is headquartered, and North Carolina.

Blaine, again, pondered why NCUA "moved quickly" without notifying the $10-billion-plus CUs in advance of the announcement. "You don't surprise folks unless there is some urgency-and there certainly is no urgency I am aware of with the largest credit unions. The billion-plus credit unions have not created the losses, nor does it look like they will."

What Drove The Move

Fairbanks responded that the issue is not whether the largest credit unions are causing problems, but what would happen if one of them ran into trouble, given their size relative to the Share Insurance Fund. "The goal is to continue to ensure safety and soundness of these credit unions and protect the credit union system from losses."

Fairbanks pointed to NCUA chairman Debbie Matz's recent speech at NAFCU's Annual Conference in Nashville during which she shared that one of the reasons for the new office is the continuing trend of fewer credit unions holding more of the industry's total assets. She said ONES will be dedicated to the challenges of supervising the largest credit unions, promoting consistency of exam practices, and enhancing quality control.

"The growing concentration of assets in the credit union industry requires a regulatory structure that allocates resources appropriately. Larger potential risks have wider potential consequences, so it does not make sense to supervise a $10-million credit union in the same way as a $10-billion credit union," Matz said.

But Blaine suggested that the new office could hinder the growth of the largest credit unions. "When you get buried in snow and ice and are driving you never hit the brakes. We are in an icy economic environment and everyone is performing well and here comes (NCUA) trying to slam on the brakes. It's not what you do in these economic times."

Spokespersons for Navy FCU, Pentagon FCU and BECU all responded to Credit Union Journal that it was too soon to comment on the new office.

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