ALEXANDRIA, Va. — Mark McWatters, the newest board member of the National Credit Union Administration, said Thursday he thinks the agency should devote more resources to combatting what he termed "garden variety fraud at smaller credit unions."
Commenting at this month's Board meeting, McWatters, who took office Aug. 26, said the agency should consider "thinking about things like fraud" as opposed to a single-minded focus on regulatory issues.
But NCUA Chairwoman Debbie Matz disagreed, noting, "I take exception to that comment."
The exchange occurred while the agency's outgoing Chief Financial Officer Mary Ann Woodson was delivering the National Credit Union Share Insurance Fund (NCUSIF) quarterly report.
Woodson said 12 credit unions failed in the first three quarters of 2014 and that fraud accounted for $28.6 million of the $30.4 million NCUA spent to liquidate them.
There is no denying small credit unions are under stress. According to NCUA statistics, credit unions with less than $10 million of assets experienced declines in both net worth and membership in the first six months of 2014.
Moreover, one in four small credit unions — 824 out of a total of 2,068 — received a CAMELS rating of 3 or worse on their most recent exam.
By contrast, credit unions with more than $500 million of assets experienced robust growth in membership and net worth. This is a trend Credit Union Journal has reported on in its ongoing coverage of the "Great Divide" between small and large credit unions.
Despite those numbers, Matz said it would be unwise to devote more of the agency's resources to detecting fraud at the expense of promulgating regulations.
"Safety and soundness and sound regulation go hand in hand. I want to make sure that is on the record," Matz said.
The fraud discussion occurred at the end of an otherwise routine 40-minute regular meeting where the board also announced that there would be no premiums assessed on the NCUSIF this year.
"With the Share Insurance Fund on a sound footing, NCUA will not charge federally insured credit unions a premium in 2014," Matz said in a statement released after the meeting. "The number of troubled credit unions continues to decline, and insurance losses remain manageable. Prudent regulation and supervision of a credit union system that continues to be strong and stable have kept the Share Insurance Fund at the maximum equity ratio permitted by law."
NAFCU said it was pleased the NCUA doesn't plan to assess a share insurance premium for 2014. "In the meantime, we continue to urge NCUA to exercise greater transparency by fully disclosing the amounts disbursed and allocated for each fund it administers, " said Mike Coleman, director of regulatory affairs at the trade group.
Also during the meeting, the NCUA Board unanimously approved two proposed regulations for comment. One would establish rules for the escrow of flood insurance payments; the other would make minor adjustments to NCUA's four-year-old rule governing corporate credit unions.
The vote signals the start of a 60-day public comment period, although NCUA officials said it was unlikely either proposal would generate a significant response.