GALVESTON, Texas-What often seems to be overwhelming regulatory compliance demands will "continue to be an issue" for the foreseeable future, according to one analyst, who is recommending all credit unions have a designated compliance officer.
"This person needs to be plugged in to all of the areas of the credit union, and must be very well trained," said Steve Gibbs, AVP-shared compliance resources for Credit Union Resources, Inc., a subsidiary of the Texas Credit Union League. "Credit unions need to develop a compliance culture that includes buy-in from management and staff, and there needs to be training."
Gibbs told the Texas league annual meeting NCUA's focus will increasingly be on mortgages and member business loans.
"There is nothing wrong with a well-written first mortgage, as long as a credit union hedges against interest rate risk, possibly by using derivatives," he assessed. "One positive is mortgages have a lower turnover than auto loans. Interest rate risk and asset liability management will be targets for examiners."
And while exam initiatives will continue to include an evaluation of adequate allowance for loan loss (ALL), Gibbs said conditions have "finally reached the point where even examiners acknowledge credit unions are overfunding ALL."
On a related note, Gibbs said extra attention being given to loan modifications may mean some would be wise to rethink their policies, while carefully tracking loan mods already made.
Outsourcing loans will not mean an end to scrutiny, he warned. For any outsourcing, Gibbs said examiners will want to see due diligence that includes contracts in place and a demonstration of monitoring efforts on the third party by someone at the credit union.
"The examiners are like a pit bull with a rabbit on this; they are not going to let go," he said.
On the technology side, CUs should expect an increase in the scope of examinations. Gibbs said examiners will want to see periodic IT risk assessments performed at least every two years.
Older issues are not going away-Gibbs said the importance of the Bank Secrecy Act was illustrated by recent issues at a major bank.
"Even with an army of compliance people, Citibank had problems with potential money laundering," he reported. "This shows the importance of continued BSA training, including of frontline people. Go to
Many credit unions have wondered what effect the new Consumer Financial Protection Bureau will have on their operations. Gibbs' assessment of the fledgling regulator's potential impact sounded like a horror movie advertisement: "Be scared, be very scared."
