Steps To Take To Streamline Your Compliance Challenges
In our current economic climate, it comes as no surprise that the financial services industry is under increased scrutiny. Therefore, it is no surprise that NCUA has taken a more aggressive stance regarding enforcement and administrative actions.
Given this stance, it is also understandable that credit unions may not see eye-to-eye on every issue with their examiner.
NAFCU responded to this rising concern by creating a document, with input from NCUA and credit unions, which provides a broad overview of how credit unions may wish to handle the examination process. We believe that better-educated credit union leaders improve the chances of accuracy in the examination process, and that was one of our goals in writing, "Managing Examinations in Challenging Times." We made it available to NAFCU members and nonmembers alike, because we think everyone would benefit from examinations that accurately rate a credit union's compliance with NCUA requirements. However, it is not intended to provide legal advice or act as a substitute for other steps credit unions should take when preparing for an examination. Each credit union's situation is unique and how a credit union responds to an examination is their responsibility alone.
Importantly, credit unions should know the administrative tools NCUA has at its disposal, including a Document of Resolution, Letter of Understanding and Agreement, Cease and Desist Order, as well as other powers such as civil money penalties, removal of credit union officials, issuance of prohibition orders and conservatorship.
Additionally, during the exam process, credit unions should respect NCUA's position and treat the examiner professionally. Moreover, credit unions should do their due diligence. Do not sign anything on behalf of your credit union unless you understand it thoroughly. NCUA has indicated that credit unions that sign a Document of Resolution or Letter of Understanding and Agreement will be held to the agreement.
NAFCU members offered valuable insight that provided the background for 10 key points we featured as part of managing the review process. Here are the highlights:
* Do nothing. Depending on the gravity of the matter, a credit union may not want to contest an examiner's position.
* Discuss the issue. If a credit union disagrees with something, it should discuss it with the examiner. If that proves unsuccessful, it may be valuable to bring in a supervisory examiner.
* Formal appeals. There are numerous venues available to credit unions if informal discussions fail.
* Develop in-house capabilities. Credit unions should consider the development of staff in key areas to better understand NCUA's official position on given issues. This investment will pay dividends in handling disagreements or preventing ones from occurring.
* Develop outside relationships. Credit unions may wish to develop relationships with outside auditors and attorneys and consult with them on a regular basis to foster their understanding of that credit union's operations. Some credit unions even have legal counsel present when NCUA has requested to meet the credit union's CEO and board.
* Be proactive. Examiners visit many credit unions, but no one examiner is an expert on your credit union. Time spent educating the examiner about your specific operation will be mutually beneficial.
* Document policies, procedure and training. Credit union records should reflect the rationale behind its training practices, policies and procedures so that an examiner can review them.
* Be readily acquainted with NCUA's examiner manual. NCUA has an Examiners Guide that is the reference guide for credit union examiners. Credit unions should familiarize themselves with this manual to gain an understanding of NCUA expectations on issues and be better informed about the exam process.
* Stay professional. Make the process as cordial and easy as possible. Treat the examiner with respect and give the examiner a comfortable and productive work environment.
* Be specific. For clarity, many credit unions ask for the specific legal or regulatory citation from an examiner when recommendations are made.
* Stay connected. Some credit unions indicated that tapping into trade associations, training, and conferences made them better prepared to deal with the uncertainties involved with NCUA supervision and examinations.
If you are interested in the full document, it is available at www.nafcu.org/ManagingExams.
Ultimately, we hope you find the document to be useful and will lead to a more constructive examination process and foster a better working relationship with your credit union's examiner.
Anthony Demangone is Director of Regulatory Compliance with NAFCU and can be reached at firstname.lastname@example.org.