The seemingly senseless redundancies. The ambiguous language. The "best of intentions." The thousands and thousands of pages of rules and amendments and new laws-every year. It's that much-discussed, often-cursed and never-lifted "compliance burden." And if you think it's just credit unions struggling to keep their heads above paper, think again.
The regulators have the exact same challenge, too.
Few people ever sympathize or even empathize with federal and state regulators when it comes to compliance. Instead, they are typically blamed by credit union execs for being the beasts of that burden, as if examiners spend all those nights in hotel rooms, angry they aren't refunded for the pay-per-view, fiendishly devising new rules. Instead, regulators and examiners often are spending that time trying to decipher and best enforce rules that are coming from federal agencies such as the CFPB and Treasury.
"It's just as onerous for us as it is for credit unions to keep up," said John Kolhoff, director of the Department of Insurance and Financial Services with Michigan's Office of Credit Unions, who is the new chairman of NASCUS. Kolhoff said one of NASCUS' primary values is in helping its state regulator members to "work through" what's coming down from Washington and which applies to state-charters as much as the feds. He stressed regulators and examiners are as interested in correctly interpreting the new rules and then ensuring consistent compliance as are credit unions themselves.
Kolhoff, along with Cathy Tierney, president/CEO of Community First Credit Union in Appleton, Wis., and chair of NASCUS' Credit Union Council, and Mary Martha Fortney, CEO of NASCUS, sat down with Credit Union Journal during the association's annual meeting last week in Coeur d'Alene, Idaho.
Kolhoff said that in addition to the NASCUS guidance, which seeks to summarize for examiners all those rules that require reams of paper to print, the association also counts on guidance from general counsel and discussions during working groups with NCUA in seeking to get some clarity on the intent of the same. Of course, you know what paves the road to Hell, and when Congress and federal agencies get involved, that road becomes a freeway.
Here's a look at some of the other thoughts shared by the three:
* While regulators say they are doing all they can to get their arms around the new rules, Community First's Tierney acknowledged, "From a credit union perspective there is nothing more aggravating than when an examiner doesn't understand a new rule. Right now the rules around mortgages, for instance, are coming fast and furious. It is helpful that NASCUS is leading a way through this. But it's not just understanding this from a process perspective; the question is how to explain this to the members. Members want to know 'What's wrong with you? Why can't you do this like you have always done it?' "
* "One of our frustrations is that all of the [NCUA] rules aren't in one place," said Fortney. "The insurance rules, for instance, should be consolidated in one place, part 741. Instead, they are sprinkled throughout [the federal rules]."
* 2013 marks the fifth anniversary of the financial crisis and the mortgage meltdown, and just as it's meant hard lessons for CU management, the same holds true for regulators. Kolhoff said it has meant a renewed focus on enterprise risk management for CUs and examiners. He said the "subjective nature" of an exam may often lead to disagreements, but "it's one of the most important parts as it speaks to a CU's future viability. "It isn't just the inherent risk, but management of the evolved risk profile," said Kolhoff. "Credit unions have evolved significantly in the past 10 years. They've become more complex. They have more authority. Most have a person overseeing risk management. Many of those that haven't have had to merge because they have not evolved."
But how do examination agencies evolve to keep up? Kolhoff said training through organizations such as NASCUS has been key for keeping up on issues such as commercial lending. Kolhoff is also pushing the pace of that evolution. He calls the CAMEL ratings largely antiquated, and believes CAMELS is more appropriate, with the "S" standing for "sensitivity to market risk." The FDIC, for instance, has had its "S" together since 1999, he noted. Fortney also said NASCUS has been in discussions with NCUA about the issue.
I'll have more from the conversation next week.
* I heard from a couple of CU CEOs who said they, in turn, had heard CUNA's board was considering a proposal endorsing a taxable CU charter option. But CUNA CEO Bill Cheney said that's not true. "The CUNA board is not discussing any proposal like that," said Cheney. "Certainly all kinds of contingency plans have been discussed but not at the board level. There is not a proposal, there is not a suggestion and there certainly is not a policy. In fact, we're trying to do all we can to do just the opposite."
Frank J. Diekmann can be reached at fdiekmann@cujournal.com.
