National Consumer Cooperative Bank:

Oversight Adequate But Federal Loan Repayment Needs Monitoring

GGD-95-63: Published: Feb 24, 1995. Publicly Released: Feb 24, 1995.

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Pursuant to a congressional request, GAO reviewed the safety and soundness of the National Consumer Cooperative Bank (NCB), focusing on whether NCB is: (1) fiscally sound; and (2) able to repay its debt to the Department of the Treasury.

GAO found that: (1) NCB is a private, cooperatively-owned financial institution with limited ties to the government; (2) although NCB is overseen by the Farm Credit Administration (FCA), its discipline and most of its funds come from private-sector lenders; (3) the government does not guarantee any obligations incurred by NCB and NCB creditors do not believe that the government would intervene if NCB became financially unstable; (4) there is no need for additional regulatory oversight because the safety and soundness of NCB appears to be effectively monitored by FCA; (5) NCB has a direct financial link to the government through its debt to the Treasury; (6) as of December 1993, the government's potential financial liability was about $183 million; (7) federal law requires NCB to repay the principal amount of its debt no later than October 31, 2020; (8) in February 1993, NCB adopted a plan to accumulate a portion of the funds needed to repay its debt; (9) Treasury should be legally required to approve or monitor the NCB repayment plan; and (10) Treasury's involvement in the NCB repayment plan would help ensure that NCB maintains its repayment schedule, meets its debt requirements, and protects the taxpayers' interest.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: No action was taken in the 105th Congress.

    Matter: Congress should amend the National Consumer Cooperative Bank Act to require the Department of the Treasury to approve the NCB plan, including any future revisions, for repayment of the class A notes. Treasury should also, through FCA, monitor NCB performance against the plan and require revisions as needed. The amendment should provide for FCA to evaluate and report NCB compliance with the terms of the NCB approved repayment plan as part of the FCA annual examination process and provide Treasury, as well as Congress, with the reports of examination.

  2. Status: Closed - Not Implemented

    Comments: No action was taken in the 105th Congress.

    Matter: Congress should require that the government's representative on the NCB Board be a representative of Treasury.


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