State Regulators, Examiners Strive to Meet Challenges
Congress, state legislatures, the media, consumer groups and the general public continue to shine a spotlight on the strength of financial institution management. This same spotlight is shining on the strength of state and federal regulatory examination and supervision procedures. In the credit union system, growing compliance requirements and the increasing complexity of credit union operations have made the work of credit union executives and their examiners that much more challenging.
Lately, the credit union system has been publicly discussing the state of examinations and the supervisory processes of regulators, both state and federal. The downturn in housing and the job market has had a major impact on all financial institutions, including credit unions. With the assessments and premiums associated with the corporate situation, credit unions are facing a unique set of difficult economic circumstances.
The "M" in CAMEL (management) has always been and continues to be a prominent area of focus for state regulators, as well as for the federal regulator. A recent report issued by the NCUA Inspector General revealed that credit union management actions were the most significant factor in the credit union failures reviewed in the report. The ability of a credit union’s management and board of directors to make sound business decisions is essential and will be reflected in the credit union’s examination.
State regulators are emphasizing to credit unions that management actions are directly related to the strategic direction of the board of directors. The credit union’s board of directors sets the tone. Regulators expect a strong board to be fully engaged in the examination as well as the continuing supervision process. For example, the board should ensure that past examiner findings are addressed by the time the next examination occurs.