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Matz faces range of challenges following Senate confirmation.

Following Senate confirmation by unanimous consent, Deborah Matz faces a large and complicated list of challenges as chair of the NOUA at a critical time for the credit union movement.

Matz, who was appointed by President Obama in May and confirmed on Aug. 5, hadn't been sworn in as of press time but was likely to take office before the end of the month, according to several sources.

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Once she begins work, she'll have to guide the agency toward its next steps in dealing with the effects of the recession on natural person and corporate credit unions that has put a strain on the NCUSIF. In addition, the agency is working on its plan for revamping the structure of the corporate credit union system. Also, the industry is shrinking as a result of the mergers of some credit unions and the failure of others.

The asset losses-caused by the shrinking economy as well as the premiums paid to the NCUSIF as a result of the need to rescue the corporate credit unions-will affect the NCUA's actions in several of these areas.

When asked what Matz's biggest challenge is, long-time financial service industry analyst Bert Ely replied, "The survival of the credit union movement."

The structure of corporate credit unions, which the board will address in a rule change that is working its way through the agency has drawn considerable interest.

The agency received approximately 500 comment letters. During her confirmation hearing last monthher only public comment since being appointed-Matz didn't shed much light on her views about the corporates. She noted, however, that she voted against the 2002 corporate credit union regulations while on the board because they didn't adequately address her concerns about limiting concentration of risk.

Current NCUA Chairman Michael E. Fryzel, who will remain on the board as a member once Matz is sworn in, told a House subcommittee in May that he will push for stronger risk-management tools as part of an overhaul.

He said he favored a mandated 5% core capital leverage ratio (including a certain percentage of retained earnings) for corporate credit unions to be considered well-capitalized. He added that the NCUA requires a "significant amount" of a corporate's core capital consist of retained earnings. The rule will also include risk-weighted capital standards and require that all capital instruments qualify as Tier 1 or Tier 2 capital.

Bethpage Federal Credit Union President/CEO Kirk Kordeleski said he hopes under Matz, the agency will be more transparent about the health of the corporates so that credit unions can do more effective planning.

"Until we know more about the corporates, including the assumptions made in the Clayton and Pimco models, it will be difficult to get the full picture. The costs to natural persons are a drain on how we operate this year and how we plan for what we can and can't do in 2010 and 2011."

Another large issue that the agency will likely deal with is supplemental capital.

NCUA Board Member Gigi Hyland has been the point person on this issue and has been working with the credit union trade associations and other stakeholders to come up with a proposal. Several sources at the agency said the board could take up the issue this fall.

So far, there hasn't been consensus, though last year CUNA and NAFCU issued a joint statement. The trade groups reiterated their past support for risk-based capital standards that include "reasonable leverage ratios," identical to the rules of the banking system. Ely said because credit unions can't raise capital, those that have been hurt by the economy have limited options and merging weaker ones into stronger ones is not a panacea.

"Many of the better capitalized credit unions still aren't well off, and so if the weaker credit unions can't find a merger partner, they may have to think about converting to a mutual savings bank. And that's not good for the credit union movement," he said.

Whatever challenges the agency faces, Matz will be able to look at them through the eyes of both a regulator and a former credit union executive, having served as executive vice president/chief operating officer of Andrews Federal Credit Union.

Kordeleski said that combination of experience could result in better decisions by the agency.

"She will be keenly aware how the board's actions affect individual credit unions and the business operations of credit unions," he said.

Before joining the NCUA Board, she worked on Capitol Hill and as a senior appointee in the U.S. Department of Agriculture during the Clinton administration.

She will take the board seat currently held by Rodney Hood and succeed Fryzel as chairman. Fryzel, who has been chairman since joining the board July 29, 2008, will remain on the board as a regular member until his term expires on Aug. 2, 2013.

Hyland, a Democrat who was appointed by President Bush, is serving a term that expires Aug. 2, 2011.

BY CLAUDE R. MARX

-cmarx@cutimes.com
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Author:Marx, Claude R.
Publication:Credit Union Times
Date:Aug 19, 2009
Words:832
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