TOPKEA, Kan.-The proposed rule to reform the corporate system is a bit too one-size-fits-all for some state supervisors.
John Smith, administrator of the Kansas Department of Credit Unions, is worried that forcing state-chartered corporates to essentially operate the same way as their federal counterparts could injure the diversity of the system and set bad precedent for natural person institutions
"I'm concerned as a state regulator that this will bleed over into our (regulation) 703," he said. "The statute here in Kansas allows me to write guidelines and I think we've done that quite well. I see this as part of a slippery slope that the next thing will be a revision to 703."
As for the future of the corporate system as a whole, Smith noted that while many state-chartered institutions are in better financial condition than giant federal corporates, many operated simply as a pass-through to U.S. Central and will have to adjust to an environment without a wholesale corporate.
"Obviously there is going to be a transition phase, there will have to be some adjustments and until we see the final rule I think it's difficult to try to project what the system will look like," he said. "I think the key thing is what NCUA can do with the legacy assets. It's extremely important that they be segregated in some manner so that the corporates that remain or re-organize will start with fresh and clean balance sheets."