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Matz: Corporate Credit Unions Can Help All Credit Unions Grow Stronger in the Future

NCUA Board Member Presents Opening Keynote at ACCU Conference

Oct. 4, 2004, Chandler, Ariz. – “Corporate credit unions can play an even greater role in helping their member credit unions grow stronger in the future,” suggested NCUA Board Member Debbie Matz in the opening keynote address to the Association of Corporate Credit Unions (ACCU).

Matz shared eight concerns for the future of natural-person credit unions and discussed many ways that corporates can help overcome these challenges:

1. Slow Membership Growth – “By leveraging their expertise and economies of scale, corporates can enable credit unions to extend new services to millions more members. For example, with support from corporates, more credit unions are able to offer attractive leading-edge services such as electronic bill paying, check imaging, international remittances, and member business loans.”
   

2. Declining Mortgage Market Share – “Corporates can help credit unions build the capacity they need to raise their mortgage market share above 2%. By providing long-term liquidity at attractive rates, corporates can help credit unions reach new markets and fund more affordable mortgages.”
   

3. Interest Rate Risks – “By facilitating loan participations and packaging mortgages for sale on the secondary market, corporates are working to reduce interest rate risk on credit union balance sheets. And corporates enable credit unions to retain their mortgage servicing, so they can build valuable relationships with their members.”
   

4. Disappearance of Small Credit Unions – “Corporates can essentially serve as a back office for small credit unions. Some corporates help with everything from asset/liability management, to regulatory compliance, even strategic planning and field of membership expansions so that small credit unions can offer new services and attract new members. I also encourage corporates to recommend mentors for small credit unions, suggest training programs, explain internal controls, and spend more time teaching small credit unions to reconcile their corporate accounts to prevent recordkeeping problems. This assistance can mean the difference between life and death for small credit unions –and ultimately, help prevent taxation.”
   

5. Taxation – “Preserving credit unions’ tax exemption is critical to protecting safety and soundness. Corporates can make a contribution to keeping credit unions tax-exempt, by helping small credit unions survive, and by helping all credit unions reach new constituents. It’s also important to educate lawmakers about corporates. I’m pleased to see that ACCU has a pilot program to encourage members of Congress to visit the corporate credit union in their home state. If lawmakers understand how corporates ultimately benefit their constituents, they will not be inclined to support taxation.”
   

6. Investment Risks – “Corporates that sell complex investments to credit unions have incentives to do everything they can to ensure that their members understand what they’re buying. But credit unions need to know not only what they’re buying, but who they’re buying it from. When credit unions buy investments from outside brokers, corporates should advise them to do their due diligence.”
   

7. Indirect Lending Risks – “At credit unions doing indirect lending, indirect loans account for 125% of their net worth. If indirect lending portfolios turn south, this will threaten credit unions’ safety and soundness. NCUA has just released an alert to examiners to detail many potentially serious risks for credit unions that do indirect lending or outsource their lending. Examiners will be checking credit unions’ due diligence on auto dealers and any other third party involved in indirect lending transactions. Since corporates have a vested interest in their members’ safety and soundness, corporates are in a position to help reinforce NCUA’s message about the importance of due diligence.”
   

8. IT Security Risks – “Corporates are a source of innovative new technology for credit unions. So IT security risks apply to corporates as well as their members. NCUA expects corporates to protect IT security in six critical areas: 1) Constantly update IT security policies; 2) Obtain independent reviews of all Internet applications; 3) Institute ongoing oversight of vendors’ IT security; 4) Train employees to recognize and report suspicious activity and security breakdowns; 5) Complete proper testing before changing any hardware or software; 6) Regularly test disaster recovery plans. That’s how corporates in the Southeast weathered four hurricanes in the past two months, without any disruption in service to their members.”

“Corporates across America have defied the odds,” Matz concluded. “Only a few years ago, so-called experts predicted that by now there would be a market for only about five corporates, if any at all. Yet with 31 corporates operating today, the corporate network has experienced record asset growth for each of the past three years. As long as corporates continue to add value to their members, corporates will continue to thrive – and all credit unions will have an important resource to help strengthen their safety and soundness for years to come.”

Recommended by Senate Democratic Leader Tom Daschle (D-SD), Matz was named as a recess appointee to the NCUA Board in January 2002 and nominated to a seat on the Board on February 27, 2002. The U.S. Senate confirmed her on March 22, 2002. As part of the NCUA Board, Ms. Matz oversees the regulation of federal credit unions and the administration of the federal insurance fund covering approximately 9,500 credit unions in the U.S.

A public service veteran of nearly 25 years, Matz is a member of three credit unions and resides in McLean, Va. with her husband and two children. Before her appointment to the NCUA Board, Matz was appointed by President Clinton as Deputy Assistant Secretary for Administration in the Department of Agriculture.