Capito and Maloney Introduce Measure to Improve Examination Process
The NCUA and other regulators would have to do a more thorough job of explaining the reasons behind their examination findings and give financial institutions more latitude on certain transactions, if a bill introduced by Reps. Shelley Moore Capito (R-W.Va.) and Carolyn Maloney (D-N.Y.) passes.
The measure would require federal financial regulators to produce examination reports within 60 days of an examination’s completion. In addition, if the financial institution wants it, the agency must include an appendix to the report listing all the facts that were used as a basis for the conclusions.
The bill also creates an examination ombudsman within the FFIEC, with whom credit unions and other financial institutions can file complaints.
A financial institution unhappy with the results of its examination would have the right to appeal it to an administrative law judge who would then submit findings to the ombudsman.
The measure also mandates that the NCUA and other agencies don’t put a commercial loan in non-accrual status just because the collateral has decreased in value. It also requires the regulator to remove a modified or restructured commercial loan from non-accrual status if the borrower demonstrates that it can regularly repay the loan. Capito and Maloney are, respectively, the chairman and ranking Democrat on the House Financial Services Committee’s Subcommittee on Financial Markets and Consumer Credit. The panel is planning to hold a hearing on the bill on December 6. The measure has eight cosponsors.
“We have heard significant concerns about the fairness of the examination process for financial institutions and their ability to effectively appeal regulator decisions. This legislation provides financial institutions with a fair and impartial process to appeal examination reports for federal financial regulators and providing further clarity to regulators,” Capito said in a statement.
NCUA spokesman Todd Harper said they are reviewing the bill and don’t have a position on it yet. He noted that in June, NCUA Chairman Debbie Matz wrote in her column in the agency’s newsletter that there is an extensive appeals process in place if credit unions are dissatisfied with the results of their examinations.
She also noted that the agency has a strictly enforced policy that forbids retribution against credit unions that appeal their examinations.
CUNA Senior Vice President Ryan Donovan said there is “much for credit unions to like in the bill.’’
He added that giving credit unions more information about the basis for certain examination findings and increasing the opportunities to make helpful will be helpful.
CUNA has made improving the examination process one of its top priorities in dealing with the agency.
NAFCU spokeswoman Patty Briotta said, "NAFCU is weighing the full impact of the proposed legislation for our members."