MONTEREY, Calif. — State charters in the Golden State are in for a period of "tough love," according to their regulator. But that love can be a little less tough if they are prepared for what their examiners are expecting of them.
The regulatory stance isn't unique to California. State (and federal) regulators in other parts of the country have also begun placing new scrutiny on CUs during reviews, especially on allowances for loan losses.
RaAnn Wood, director of credit unions with California's Department of Financial Institutions, is urging CUs to prepare for future exams that take a hard look at "who is running the shop and how are you managing through this." In particular, she said examiners are going to be focusing on how credit unions are managing their allowances. "We're going to look at some areas that we may not have looked at in the past," she said. "We want to know your managing your risk. I'm also excited that we do have a much stronger enforcement policy. Don't take it personally, but we do need to lay out the targets for your credit union."
Wood said the DFI will expect to see documentation of how boards have become "more heavily involved" and a demonstration that the board "really understands what's in the portfolio and your expectations of the management team."
She added that credit unions need to more closely monitor their own members. "We're seeing tremendous deterioration in credit scores of the borrowers and deterioration of credit quality, and if you've got open lines of credit you've got to be reevaluating that," Wood said.
Wood, who was formerly with the California Credit Union League and has also worked as a credit union manger, spoke with Credit Union Journal during the California/Nevada leagues' Big Valley Conference here.
