In a letter to the National Credit Union Administration board and inspector general today, the American Bankers Association called for a “top-to-bottom assessment” of whether the credit union industry is living up to its statutory mandate to operate not-for-profit and serve people of “small means.” Citing a report published earlier this week by respected analyst Karen Shaw Petrou and her firm, Federal Financial Analytics, the association pointed out several troubling findings that merit further investigation. (ABA commissioned the report, but had no editorial control over FFA’s research or conclusions.)
Among Petrou’s findings was a need for NCUA to impose mission-related requirements. The report noted that the modern credit union regulatory framework has allowed the credit union business model to transform into one often indistinguishable from banks, with no significant mandate (akin to the Community Reinvestment Act regulations with which banks must comply) to serve low- to moderate-income households.
The report also pointed out that the NCUA’s capital requirements and other safety and soundness rules are substandard and far more relaxed than those adhered to by banks. This finding that was further illustrated by the NCUA’s decision last week to once again delay the implementation of the risk-based capital rule for the nation’s largest credit unions.