WASHINGTON—NCUA Vice Chair Rick Metsger Tuesday held up the “network credit union model” as one potential way to help smaller, struggling credit unions not only survive but grow.
The network credit union model merges in several credit unions under one large “network” credit union, all sharing a common backoffice and systems. The move allows smaller credit unions to gain the advantages of greater scale—such as spreading the compliance burden and lowering operating costs—while still maintaining their local presence and brand. Network credit unions keep their current name but operate as a division of the network CU. A few of these models have been established in the U.S., most recently in Pennsylvania.
Speaking to CUNA’s GAC, Metsger said the network CU is one answer to the growing number of small credit unions that are merging out or failing.
Metsger noted the strong overall CU numbers for 2015 actually masks what is happening to the small shops. “The averages obscure the growing disparity between the haves and the have nots. Credit unions over $250 million in assets experience almost double-digit growth in shares and loans, but below $100 million we see declining growth.”
Metsger explained that NCUA’s Office of Small Credit Union Initiatives is looking at the network CU concept, “where credit unions under the cooperative spirit can join under a stronger charter but maintain their local identity and gain greater resources.”
Metsger said that NCUA’S Office of General Counsel last week validated that the Federal Credit Union Act supports the network CU model.
“My pledge to you today is the (Federal Credit Union Act) won’t be an impediment for smaller credit unions to join together,” said Metsger. “The death of the small credit union does not have to happen.”
Metsger also spoke about another pledge he made at the 2015 GAC.
“Last year I stood right here saying NCUA would move to improve the member business lending rule and take a fresh look at the field of membership rules,” said Metsger. “I said that despite the bureaucracy in Washington today, I would have both issues before the board before the end of last year. And I am proud we delivered on both points.”
Looking forward, Metsger said the agency is carefully reviewing the record 11,359 field of membership rule comment letters to ensure a final rule that is consistent with the Federal Credit Union Act and that it allows CUs to serve the financial needs of their members.
Metsger added that NCUA is committed to protecting the security of credit union and member data, reminding that the agency has made extensive investments in its cyber defenses, introducing a new, more secure portal where CUs transfer data to the agency. The portal, said Metsger, will lead to credit unions providing the agency with more data online, potentially reducing examiner time at the credit union.