Work with management to address risk, Matz tells CU volunteers

January 22, 2015

ALEXANDRIA, Va. (1/23/15)--Credit union volunteers are the "first line of defense" against losses to the credit union system, National Credit Union Administration Chair Debbie Matz said Thursday.

Speaking at a Volunteer Leadership Institute event in Kauai, Hawaii, Matz credited credit union volunteers with helping guide their institutions through the financial crisis.

"Engaged volunteers have led credit unions diligently, from recession through recovery. You have turned unprecedented challenges into enduring opportunities," she said. "With the financial crisis behind us, we need to discuss the challenges ahead, including interest-rate risk, cybersecurity and the need for credit unions to hold adequate capital."

Interest-rate risk for the credit union system is now higher than it was before the crisis, Matz claimed. Net long-term assets have risen to 35% today from 25% of all assets 10 years ago.

The Credit Union National Association has agreed that interest-rate risk is an area credit unions should be concerned about, but believes that it can be handled in the context of existing rules, particularly since the NCUA's last interest-rate risk rule took effect just two years ago.

Matz also address the "alarming rate" of growth of cyberattacks, as the number, variety and sophistication of fraudsters and terrorists increases. She warned that hackers could use a vulnerable credit union as an entry point into the larger financial system.

CUNA has urged President Barack Obama and the U.S. Congress to work on enacting data breach legislation that would set a national notification standard for notifying consumers of breaches, as well as hold merchants to the same data security standards as apply to credit unions.

Matz also reviewed changes in the NCUA's revised proposed risk-based capital rule, saying the agency is required by law to make such a rule, and that its implementation is good public policy.

"We also need to fix the problem of inadequate capital in high-risk outliers in the credit union system," she said. "A modern rule would have helped more credit unions avoid failure and reduced losses to the Share Insurance Fund, which your credit unions all had to pay."

While CUNA believes the revised risk-based capital proposal has many positive changes compared with the original proposal, the organization has remaining concerns. A variety of information on the proposal is available at CUNA's Risk-Based Capital Action Center.