NCUA IG Slams Examiner Shortfalls in 10 CU Failures
If NCUA and state examiners had been more aggressive in their oversight of 10 failed credit unions, losses to the NCUSIF could have been stopped or mitigated, according to a report by the NCUA's Office of Inspector General.
The report, which analyzed and summarized the agency's earlier material loss reviews of 10 natural person credit union failures, also concluded that the actions of management at each of the credit unions contributed to the failures.
Poor strategic planning and decision making and inadequate oversight were in evidence in many of the credit unions, according to the report. One failure--Center Valley FCU--was caused by fraud. Two failures, New London Security CU and St. Paul Croatian FCU, were alleged frauds.
To improve examinations in the future, the report recommended several changes, including improving guidance to examiners on assigning CAMEL ratings to credit unions that implement revised business plans, reemphasizing the examination guidance for third-party relationships, giving stronger guidance for the examination of due diligence over fast-growing new programs and requiring a secondary review of all CAMEL rating determinations for all credit unions with assets of more than $100 million.
The agency accepted all those recommendations except the one on providing a secondary review of CAMEL ratings for credit unions with more than $100 million. The agency said the threshold "seems too low for this increased administrative review process, but it is something we will evaluate further and set when we establish the policy.''
The report summarizes previously issued material loss reviews on the following failures: Cal State 9 CU, Center Valley FCU, Clearstar Financial CU, Eastern Florida Financial CU, Ensign FCU, Huron River Area CU, High Desert FCU, New London Security CU, Norlarco CU, and St. Paul Croatian FCU.
To read the report, go to: http://www.ncua.gov/Resources/OIG/Files/Reports/2010/OIG-10-20OIGCappingReportMLRs_11.23.10.pdf