NCUA Rethinking Matrix, Establishing Disaster Prep Guidance, Forgetting About Attestations
WASHINGTON -- NCUA staff were on hand to discuss many of the hot button regulatory issues of the day at CUNA's Governmental Affairs Conference.
Talk of revamping or eliminating the examination matrix has received mixed reviews. NCUA Director of Supervision Joy Lee said during an education session, "There are a lot of things that make the CAMEL matrix not work anymore. Credit unions complain about it. Examiners complain about it." In particular, the 1% ROA benchmark does not fit today's economy or credit unions.
CUNA and NAFCU have previous expressed support for revisiting the matrix. However, Helen Godfrey Smith, CEO of the $56 million Shreveport Federal Credit Union and a member of the board of the National Federation of Community Development Credit Unions, expressed concern about NCUA's proposed removal of the exam matrix. "It was meant to tie the hands of examiners to an objective standard should they decide they don't like something you might have done. Getting rid of the matrix seems to me to be a signal that NCUA is taking a step backward when it comes to regulation--back to the days when an examiner could make life really difficult, particularly for smaller credit unions," she stated.
CAMEL codes were initially designed to assess credit union risk, industry risk, determine supervisory response and promote consistent oversight, Lee said. The matrix was intended to help examiners convert from the Early Warning System to CAMEL in 1987.
The proposed changes as they currently stand would include discussing the CAMEL rating with the credit union and requiring examiners to explain increases or decreases in the CAMEL component or overall code, Lee explained, "not 'this is what you must be'" because the matrix says so. She said, if all goes as planned, she anticipates issuing a letter to credit unions and examiner training prior to eliminating the matrix by the third quarter.
One proposal that could have cost credit unions a pretty penny has been tabled for now. About a year ago, NCUA Director of Examination & Insurance Dave Marquis said in response to a question from CUNA staff, the agency issued a proposed reg on attestations in line with the Sarbanes Oxley Act for publicly traded companies. "We're moving forward with absolutely nothing on the subject at this time," Marquis said. Attestations were required under SOX, which does not apply to credit unions, in response to the major accounting scandals that led to the fall of Enron and serious problems for a number of large companies.
Something NCUA expects to move forward with is incorporating disaster preparedness into the regulations, including lessons learned from Katrina; the issue is timely as concerns over an avian flu pandemic continue to grow. Why is NCUA considering regulating this, Lee asked her audience. "Member confidence...that's the most important thing that we need to keep in mind."
Elements of a disaster preparedness program should include:
oBusiness impact analysis to evaluate potential threats;
oRisk assessment to determine critical systems and necessary resources;
oWritten disaster preparedness plan, to include
oPersons with authority to enact;
oPreservation of vital records;
oRestoration of vital member services;
oNotification of regulators;
oReview and update process; and
oTesting, testing, testing. --firstname.lastname@example.org --David Morrison contributed to this story.