Net worth, equity ratio discussion leads NCUA meeting
09/16/2011 03:23 pm
The NCUA in March proposed amending the Federal Credit Union Act's definition of "net worth" for natural-person credit unions under NCUA's Prompt Corrective Action authorities to allow the NCUA's Section 208 Assistance made to troubled credit unions to qualify as regulatory net worth.
The NCUA proposal also included a "technical correction" to its regulatory definition of "net worth." This technical correction would generally decrease the amount of a combined credit union's "net worth" in a credit union merger.
The agency also proposed equity ratio changes that clarify that the National Credit Union Share Insurance Fund's (NCUSIF) equity ratio must be based solely on the financial statements of the NCUSIF alone, without consolidation with other statements such as those of conserved credit unions.
These changes were scheduled to be discussed at the NCUA's July open board meeting. However, the changes were removed from the agenda shortly before the meeting took place.
Although the Credit Union National Association (CUNA) supported some of these changes, CUNA also strongly opposed a provision that would have added language to the definition of a credit union's net worth to require "bargain purchase gains" be deducted from a target credit union's net worth when it is merged with another credit union. CUNA was concerned that the proposal would result in a decrease in the combined credit union's net worth.
CUNA and its Accounting Subcommittee, which is chaired by Patelco CU CFO Scott Waite, have worked with credit union accountants on the bargain purchase gain issue.
During the meeting, the NCUA will also discuss delegations of agency authority, and the customary monthly insurance fund report is scheduled to be presented.
The closed portion of the NCUA's meeting will feature a charter and merger request as well as an appeal under Section 701.4 and Part 747, Subpart J of the NCUA's regulations. Supervisory activities and personnel issues will also be covered during the closed meeting.