OIG reviewing material ($39 million) NCUSIF loss related to failed CBS Employees FCU; report expected soon

A report is expected to be released this month on a material loss review of the now-closed CBS Employees Federal Credit Union (Studio City, Calif.), which is estimated to have cost the federal fund that insures credit union member deposits an estimated $39 million, according to an inspector general semiannual report to Congress.

The National Credit Union Administration (NCUA) liquidated CBS Employees in March; the credit union’s assets, loans, and all member shares were assumed by University Credit Union (Los Angeles). CBS Employees’ latest call report showed it had 37,057 members and assets of $654,577,105, the agency reported at the time of the liquidation.

NCUA’s Office of Inspector General (OIG) notes that it is required to conduct a material loss review of an insured credit union if it causes a loss to the National Credit Union Share Insurance Fund (NCUSIF) totaling more than $25 million plus 10% of the credit union’s assets.

The firm selected for this review was Moss Adams LLP, the report says. The OIG report says the firm will review the credit union to 1) determine the cause(s) of the failure and the resulting estimated $39 million loss to the NCUSIF, 2) assess NCUA’s supervision of the credit union, and 3) provide appropriate suggestions and/or recommendations to mitigate future losses.

“To achieve these objectives, Moss Adams will analyze NCUA examination and supervision reports and related correspondence; interview management and staff from NCUA’s Western Region; and review NCUA guidance, policies and procedures, NCUA Call Reports, and Financial Performance Reports,” the report says. “We expect to issue the final report in November 2019.”

The OIG is also required to perform limited-scope reviews of credit unions causing losses below the material-loss threshold to determine whether unusual circumstances warranted further review. It did that for Monroe Education Employees Federal Credit Union, closed in July. This credit union reportedly caused an estimated $335,530 loss to the share insurance fund; the OIG fond no unusual circumstances and determined further review was not warranted.

The OIG report, covering the office’s activities from April through September, also gives a tally of various other investigations and audits that are underway and status of prior recommendations, including that the agency add an S component (for market risk Sensitivity) to its CAMEL rating system. The OIG now reports that the agency’s new examination application released in September can accommodate an “S” component; whether to add it has yet to be decided.

NCUA OIG Semiannual Report to Congress (April 1 – Sept. 30, 2019)