LAS VEGAS–Recognizing that falling prices for oil and farm products are creating a “rough patch” for Dakota credit unions and their members, NCUA Chairman Debbie Matz urged CU leaders to make “appropriate adjustments,” including possible changes in underwriting.
Speaking Wednesday to crowd of 200 as the opening speaker at the Annual Summit of the Credit Union Association of the Dakotas here, Matz said Dakota credit unions need to be ready to serve members in tough times.
“Credit unions serving oil workers could face higher delinquencies and charge-offs if job losses mount,” Matz said, “so now is the time to review that business plan and make appropriate adjustments. This could mean changes in underwriting, reserves or balance sheet composition. Those of you from agricultural credit unions have a proud tradition of serving farmers, so I know you’ll work to help members get through this rough patch. With NCUA’s more flexible rule on troubled debt restructuring, you may be able to lower members’ mortgage payments through these lean years.”
Falling oil prices could affect each of the Dakotas differently, Matz said, triggering significant job losses in North Dakota but giving South Dakota consumers more ability to save or borrow. Both states, Matz said, are vulnerable to falling farm prices. The U.S. Department of Agriculture predicts net farm income to drop 32% this year, leading to the lowest net farm income since 2009.
In addition to discussing challenges faced by credit unions in the Dakotas, Matz also talked about upcoming regulatory relief and the ongoing risks posed by cyber threats, rising interest rates and credit unions taking excessive risks with insufficient capital.
“Our number one goal is to keep the credit union system safe, sound and sustainable,” Matz said. “You will have greater freedom in pursuit of that goal.”
Matz outlined NCUA’s relief agenda, which includes:
- Making more credit unions eligible for current relief by raising the asset threshold for defining small credit unions to $100 million from the current $50 million.
- Increasing access to secondary capital for low-income credit unions and allowing supplemental capital to be counted in full in the proposed risk-based capital rule.
- Making it easier for credit unions to expand fields of membership.
- Allowing credit unions to make their own decisions on purchasing fixed assets by eliminating the current five percent cap on those assets.