Monday, March 31, 2014

Risk-Based Capital: Commenting On Your Future - Part 10: Misleading America.

Try that again...
Was asked to provide an example of why NCUA's use of a 60+ day definition of a "non-performing asset" ( most often loan delinquency) vs. the use of a 90+ "non-performing asset" definition by bank regulators was important.  

The best example is the very clear danger that the public ( and Congress !) will be misled into believing that CU loans are weaker and riskier than those held by banks; when every historical analysis shows that CU lending results have always been much stronger, more positive!

Certainly comparing > 60+ CU delinquency with > 90+ bank delinquency "on an equal basis" is comparing a good orange with a bad apple! Comparing 60+ day delinquency to capital for CUs will always create a higher (less favorable!) ratio than comparing 90+ day delinquency to capital for banks - always!  

NCUA is knowingly permitting the public to be misled - and hurting all credit unions.

"Can't happen, you're just making things up!"  Wanna bet….

Don't mess with my
Texas (ratio)!
Why don't you "Google" the definition of "Texas ratio"?  Under the Wikipedia definition you'll find the following:  "… is a measure of a bank's troubles. The higher the Texas ratio, the more severe the credit troubles."

The "Texas ratio" is a benchmark of credit risk widely used by investors, analysts and regulators - those "in the know"(a score "above 100%" is considered "risky").  Want to see the reputation risk that NCUA is creating for all credit unions by using the 60+ day measure?

Then under that Wikipedia definition scroll down to this link:  Current Texas Ratios for All U.S. Banks and Credit Unions

Hope you see that you can look up the Texas ratio of every bank and credit union in the Country. You can even create a joint list of bank and credit union Texas ratios in your State - and who wouldn't do that?!

Do you see any indication anywhere that the local credit unions are being measured ( or less kindly, being unfairly and purposefully penalized!) on a much more conservative scale (60 days+) than the local banks (90 days+)? 

Who is the irresponsible party who permits this misleading comparison to continue?

              … don't wait for "never".


Jim Blaine said...

Bravo to folks who have taken one minute to comment… NCUA is now starting to post them…

Don't wait for "never"...

Jim Blaine said...

If as a CU member, employee or vendor, you intend to only comment on one NCUA rule in your whole, entire life…THIS IS THE ONE!

Don't wait for "never"...