SAFETY AND SOUNDNESS – A UBIQUITOUS PHRASE (FROM PAGE 4)
appetite within acceptable boundaries for the National Credit
Union Share Insurance Fund (NCUSIF), members, and the
U.S. taxpayer. It is the interconnections and interplay between
these things on a day-to-day, transaction-to-transaction,
portfolio-to-portfolio basis that creates the web of safety and
soundness that holds the credit union together. When you look
at an unsafe or unsound policy or practice, it is a practice that
allows a credit union’s risk appetite to overreach its capital
levels, the agency’s continuum of acceptable risk for the credit
union’s members, and the NCUSIF.
Safety and soundness is the view of a credit union at its most
holistic. In other words, are those “interconnections and
interplays” being managed effectively to hold the credit union
together? In recent years, NCUA has issued a fair amount of
guidance on due diligence. The guidance has urged credit
unions to manage risk by paying attention to the interplay
between different parts of their operations, investments,
lending and savings products. Viewed another way, a credit
union’s safety and soundness forms the foundation it can use
as a jumping-off point to innovate for its members and thrive.
I hope this sheds some light on the meaning of “safety and
soundness.” At the very least, I hope you’ve found this
discussion, well…interesting.
NCUA LearnCenter Report
NCUA HOSTS FINANCIAL
LITERACY TRAINING RESOURCES
The board of directors of a federal credit union is charged
with the general direction and control of the institution. The
key measure of the credit union’s success or failure is its
financial statements. As such, a director must understand
these financial statements to participate in a meaningful
manner in the direction and control of the institution.
Accordingly, to be an effective director, individuals must have
a certain base level of financial skills, consistent with the size
and complexity of the credit union operations they serve. At
a minimum, directors must have the ability to read and
understand their credit union’s balance sheet and income
statement. If directors do not have the requisite skills
when elected or appointed, they must obtain these skills in a
timely manner.
Each credit union’s program should be developed with that
credit union’s specific products, services, risk appetite, and
field of membership in mind. Consequently, director training
programs may vary from credit union to credit union.
Credit unions are not locked into providing the Board
education in any one forum. Their programs can include
internally developed training, externally provided training,
NCUA-provided training, or a combination of all.
NCUA provides basic financial literacy training two ways.
First, NCUA understands that directors are, generally,
uncompensated volunteers who have other important
demands that compete for their time. For this reason, NCUA
established an online training course that directors can
accomplish at their own pace in their free time.
NCUA’s LearnCenter online course provides a working
familiarity with basic finance and accounting practices,
including the ability to read and understand the credit union’s
balance sheet and income statement and the ability to ask,
as appropriate, substantive questions of management
and auditors.
There is a $15 fee for each person who signs up to take this
course. People can access information for the online training
at http://ncua.learn.com/directortraining.
Secondly, training is available via workshops hosted by the
Office of Small Credit Union Initiatives. While 2011 sessions
covered the key requirements of the new rule on directors’
responsibilities, these workshops will go more in depth for
2012 courses.
These workshops and roundtables are provided free of
charge. People can access information on the NCUA
workshops at www.ncua.gov/Resources/CUs/Dev/Pages/
CUDev.aspx. Check back in December for 2012 dates.
For more information on the expectations of credit union
directors, read the Letter to Federal Credit Unions
11-FCU-02 found at www.ncua.gov/Resources/CUs/Pages/
LTCU2011.aspx.
