Final thoughts from Matz as she departs NCUA
National Credit Union Administration Chair Debbie Matz will conduct the last board meeting of her tenure today and will leave the agency April 30.
News Now had an opportunity to sit down with Matz and discuss her time with the NCUA, as well as her thoughts on the credit union system going forward.
Q: What memories from your time at NCUA stick out the most?
A: After laboring over how to deal with legacy assets and coming up with innovative plans to sell NCUA guaranteed notes, I have to confess at this time that we had no Plan B. We were incredibly nervous about whether or not the securities would be sold; whether they’d be sold in the U.S. or we’d have to go overseas; and whether or not anyone would be interested in them.
So when the first round of notes was offered, and we raised more than $1 billion in just one hour, and the offering was oversubscribed, that definitely is a very good memory.
When we became the first federal depository institution regulator to earn recoveries from Wall Street firms that contributed to the crisis, and our billion-dollar recovery from JPMorgan stands out.
Although the one we had this week was half a billion dollars from Goldman Sachs, another recent but very good recovery, another very good day.
We’ve recovered more than $3 billion, and that really will help us achieve our goal of not having any more assessments and perhaps even rebating credit unions after 2021.
I have some great memories of visiting credit unions--chartering The Finest FCU in New York City, which is serving first responders, and participating in the grand opening outside City Hall with some of the [New York Police Department] veterans and local political leaders. That credit union is really thriving, and that’s a great memory also.
Q: Of all the changes you helped implement during your time on the board, what do you think will have the most impact?
A: Through my regulatory modernization initiative we conducted really a sweeping overhaul of regulations and provided thousands of credit unions with relief in 21 different areas.
In particular, our recently finalized rules on member business lending and on fixed assets represent a new way of doing business for credit unions and for NCUA. Because they’re less prescriptive, credit union officials and their boards will have more flexibility to make their own business decisions.
I think that is revolutionary in terms of how we draft our regulations and the impact that it will have on the credit unions. It’s really important for the boards to be well educated, to understand that they need to play a big role in making the policy and to make sure that the policy is being implemented as it has been envisioned by the board.
Q: Now that we’re on the other side of the financial crisis, what are your thoughts on how the recovery worked out for credit unions?
A: I have to say that the reality has greatly exceeded my expectations. When I came on, return on assets was probably less than 30 basis points. I probably would have been happy if, six years later, it was 40 basis points, and here we are at over 80 basis points. When I look at the metrics today, I’m delighted by the strong recovery.
In addition, when we were going through the corporate crisis and unfortunately had to charge credit unions assessments, I really didn’t dare to dream we might be at a point where not only did we not have to charge assessments anymore, but that there‘s a strong likelihood we will be providing rebates to credit unions.
Q: Going forward, are you optimistic about the health of the credit union system?
A: Yes. I think that the credit union system is in very good shape and the future of the credit union system is very bright. Credit unions, as you know, are dynamic and innovative, but they must also continue to evolve to meet the needs of not only their members but future members.
They really need to continue to reach out and market to millennials, and provide the types of tools and services to them that they need and want.
I think they’re getting that message, probably more so with the medium- to larger-sized credit unions than with the small credit unions.
There are going to continue to be challenges: an aging membership is a big challenge. That’s why they need to continue to reach out to young people and turn those potential members into members.
Interest rate risk, cybersecurity--those are all issues that are not only supervisory concerns at NCUA, but issues that credit unions really need to deal with in their everyday business environment. They seem to be responding well to those issues and doing what they need to do. They’re going to need to be aggressive, particularly when it comes to cybersecurity.
With the growth in membership, and the increasing sophistication of credit unions, I think they will continue to grow and thrive into the future.
Q: What role do you see the NCUA playing in getting the word out to millennials?
A: I don’t really see that as NCUA’s role to tell you the truth. I see the NCUA’s role as the regulator and the insurer, and I think we have to be very careful not to cross the line from regulator to cheerleader or to advocate. We try very hard to do that here.
Of course, if I’m on Capitol Hill, and I’m asked about the tax issue, I take that opportunity to explain the difference between credit unions and banks because I feel taxation would have a very adverse impact on the safety and soundness of the credit union system.
But I don’t really feel that as a regulator, it’s our role to discuss the difference [between credit unions and banks], and to advocate for credit unions in that manner.
Q: From your experience how did hearing from credit unions help shape your perspective?
A: Since I’ve been chairman I’ve held 19 in-person listening sessions and 13 industry-wide webinars in addition to crisscrossing the country to meet with credit union officials from every state.
We get some really good ideas from credit union officials that I wouldn’t get sitting in my office in our headquarters, or just talking to trade association officials.
When I go out and talk to the people who run the credit union, who understand the day-to-day business, they can tell me some of the practical processes and procedures that we require that are maybe unduly burdening them or tripping them up. They can tell me things we could cut back on or things we aren’t doing that we can do that would help them do their business better.
For instance, in a meeting with some credit union officials, they pointed out to me that our call report cycle provided less time for them to refer to us than [banks to the] the Federal Deposit Insurance Corp. That was something I didn’t know, and something we’ve been able to address.
The first time I heard there had been an issue with troubled debt restructuring was from a credit union volunteer who indicated that NCUA’s policy was preventing them from doing what I was asking them to do, which was to keep people in their homes, so we were able to address that.
I heard over and over and over again that NCUA requiring a personal guarantee on all member business loans was sometimes costing the credit union not only the loan but the member.
We were able to modify that when we finalized our member business lending rule. Even though that rule doesn’t go into effect until January, the personal guarantee will be lifted May 13.
Time and again, when I meet with credit union officials they give me good suggestions, they let me know what’s working, what’s not working, whether we need to communicate better, and we often can respond to their concerns.
Q: What would be your advice to the CEO of a small credit union?
A: I would advise them to have a viable strategy to attract millennials as members, because that’s their future.
I would advise them to take advantage of all the free assistance that NCUA’s Office of Small Credit Union Initiatives has to offer, such as webinars and training videos.
Maybe most importantly, they need to make sure their board of directors and supervisory committee understands their fiduciary duties, and they need to have effective internal controls.
Q: What have you seen during your time at NCUA that makes you think credit unions are the best option to serve the un- and underbanked?
A: In some cases, credit unions are the only insured financial institutions in a particular area, particularly a low-income area, so they serve a particularly important function.
I hope that those credit unions continue to grow and thrive because if they leave, they merge, or go out of business, those members might not any other insured financial institution with which to do business.
Q: How does the idea of not-for-profit, member owned financial institution stay at the top of mind for people looking for options in the financial services market?
A: I think what is on top of people’s minds is affordability and accessibility. That structure, the not-for-profit, member-owned structure, permits credit unions to provide affordable credit to their members, and I think that’s the attractive part.
I really don’t think most people outside of credit unions and people who are credit union members have a sense of the member-owned not-for-profit aspect of credit unions. What they do know is that they like doing business at credit unions because they’re treated well, and they frequently get loans at lower interest rates and deposits at higher rates. I think that resonates with them.