Many credit unions see examinations as necessarily evils. CUNAis hoping to make the process more tolerable and fair.

That's the association's purpose in releasing its 64-pagebooklet, “Supervisory Issues and Examinations: Guidance for CreditUnions During the Current Economic Times and Beyond.”

It's both one-stop shopping for credit unions who want to knowabout the NCUA's examination rules and a list of what theassociation sees as the rights for credit unions during theexamination process. These rights range from managing risk withouthaving to eliminate it to knowing when the NCUA will publish aLetter of Understanding and Agreement.

CUNA Senior Vice President Mary Mitchell Dunn said theassociation needed to publish the booklet because of concerns amongcredit unions about encountering state and federal examiners whoare hostile and are “not necessarily just focusing on what'shappening at their credit union but are comparing them to othercredit unions.”

Because of the financial crisis, the NCUA and some stateregulators have increased the frequency of exams and have made themmore rigorous. The NCUA is in the final stages of switching itsexamination schedule to at least once a year.

The NCUA didn't respond to the specific comments andrecommendations in the booklet, but NCUA Chairman Debbie Matz saidin a statement that “Credit union management and directors shouldalways look at their role in the examination process as an activeone, where a constructive dialogue between NCUA and the creditunion can enhance safety and soundness and identify opportunitiesfor improved service to members.”

Kansas Department of Credit Unions Administrator John Smith saidhe forwarded the 24 parts of the credit union examination rights tohis examiners. He singled out the provision about credit unions notbeing evaluated based on national trends.

“If you are going to do a risk-focused examination, as we do,then focus on the credit union's strengths and weaknesses,” hesaid.

Dunn said CUNA issued the booklet because a survey of 200 creditunions found that 27% of respondents were dissatisfied with theirmost recent examination.

The survey found that there is a greater level ofdissatisfaction with examinations among credit unions with moreassets. Credit unions with less than $20 million in assets had anaverage satisfaction rating of their latest examination at 3.8 on afive-point scale, while those with assets of $100 million or morehad an average satisfaction rating of 3.2.

The publication also includes sections dealing with generalduties of examiners, credit union examination concerns, handlingdisagreements with examiners and recommendations for both creditunions and the NCUA.

The booklet also outlines the NCUA appeals process, which Dunnsaid isn't always easy to discern on the agency's website and inthe documents it gives credit unions.

The booklet said that the agency's “process for allowing anappeal is far from clear. NCUA and state regulators should ensurethat all examination forms which examiners provide to credit unionsinclude sufficiently detailed information as to which issues may beappealed or challenged and the process for making such anappeal…”

The booklet also said published orders, such as consent orders,should “address only facts and not conjecture or speculation by theexaminer.”

The booklet concludes that there needs to be a balance. While noone “wants to undermine or lessen safety and soundness,” there is aneed for meaningful improvements and transparency in these[examination] processes.”

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