Faced with uncertainty over whether H.R. 3461 will pass and positive signs from the NCUA that it will consider improving exam procedures and streamline regulations, CUNA has asked the regulator to implement some provisions of the Financial Institutions Examination Fairness and Reform Act now.
In a March 31 letter to NCUA Chairman Debbie Matz, CUNA specifically asked the regulator to provide credit unions with support for exam mandates and create a vehicle for credit unions to appeal exam decisions.
CUNA Senior Vice President for Regulatory Advocacy and Deputy General Counsel Mary Dunn said the trade group’s leaders, including members of its exam and supervision subcommittee, have been encouraged by meetings with the NCUA and, in particular, Director of the Office of Examination and Insurance Larry Fazio.
“Our folks have been impressed that Larry has recognized that credit unions have the right to say to their examiner, ‘Here is how we plan to address the problem.’ If the problem is resolved, how you get there shouldn’t be dictated by the examiner,” she said.
Chairman Debbie Matz has also stated that she is receptive to improving the exam experience for credit unions, Dunn said.
Matz told Credit Union Times in a statement that despite a number of concerns raised during a House financial institutions subcommittee hearing on the topic in February, “We also recognize that we can take steps to improve the examination program.”
Matz also referred to the NCUA’s listening sessions scheduled from May through July, which will focus on the exam process and how the regulator can streamline regulations.
“What credit unions have to say is important, and sometimes it helps to discuss issues face-to-face,” Matz said. “We want to hear directly from credit union managers, directors, volunteers and others about how we can improve our examination process and how we can reduce or streamline our regulations. By carefully listening to our stakeholders, we can make better decisions about how to best modernize credit union regulations and the exam process."
NAFCU President Fred Becker said his members are also concerned about examiners subjectively and inconsistently applying policies and procedures during exams. Becker said his organization has been pushing the NCUA for years to update its examination supervisory manual, which would provide credit unions with specific NCUA expectations.
“Some examiners believe guidance is gospel,” Becker said, “while the NCUA’s own former general counsel said guidance is not gospel.”
The NCUA should also hold its examiners accountable for their work, he said, rather than regulate risk out of credit unions. Referring to a December 2011 NCUA board vote to put new concentration limits on participation loans out for comment, Becker said the agency set an “arbitrary number” that is “designed to simply make the agency’s job easier by removing all risk.”
“Risk exists in the financial services industry, and we need a certain amount of it. Rather than hold the examiner accountable, they just eliminated the risk,” he said.
CUNA’s laundry list also includes the establishment of an ombudsman at the Federal Financial Institutions Examination Council so credit unions could appeal exam decisions. Former Comptroller of the Currency Eugene Ludwig recommended a task force comprising the ombudsmen at various agencies that would review appeals and help develop improve appeal procedures for regulators.
“His idea has a lot of merit,” Dunn said.
Becker said he agrees that credit unions need an appeal advocate but expressed concern that credit unions would not receive enough attention from the FFIEC because bankers are also pushing the FDIC to do the same.
“It would be nice to have that vehicle…but I don’t think as a daily activity it would be very beneficial,” Becker said. Credit unions would be better served with an appeals process that begins within the NCUA, he said.
Dunn disagreed, saying that the FFIEC has “a record of being balanced in terms of looking at issues from all regulators.” Additionally, the bill’s proposal that the council would provide a yearly report to Congress would provide leverage to ensure credit unions are receiving their fair share of attention.
Both trade groups agreed that proposed NCUA legislation limiting participation loan concentrations should be scrapped this year, with Dunn adding that CUNA also opposes pending CUSO regulations in their current form.