Although the NCUA is already addressing key findings revealed in a national survey conducted by CUNA and its affiliated state league organizations, the trade association told Credit Union Times that the results still show room for improvement.
The exam survey, modeled after a program launched by the New Jersey Credit Union League in 2012 that targeted all credit unions in Region II, aims to provide CUNA with national baseline figures from which to gauge future trends in federal and state exam processes. The online survey, promoted by CUNA and the leagues, was conducted in December 2012 and January 2013 and generated a response rate of approximately 25%.
Overall, 60% of credit union CEOs surveyed said they were satisfied with their exams. However, 25% said they were dissatisfied.
“The rate of dissatisfaction is never going to be zero,” said CUNA Chief Economist Bill Hampel, “but it would be nice to move in that direction.”
Credit unions that reported being dissatisfied with their exams were more likely to be state-chartered credit unions with more than $250 million in assets, and therefore subjected to joint exams. Dissatisfied credit unions also tended to be undercapitalized, with net worth ratios between 5% and 6%, and saw their examiner assign a riskier CAMEL rating after the exam.
Credit unions with positive opinions about their exam tended to be state-chartered and not subjected to joint exams that saw their CAMEL ratings improve as a result of the exam.
Statements regarding examiner performance and exam processes that elicited negative responses were consistent with two issues already identified by the NCUA: examiners applying guidance and best practices as if they were regulatory requirements, the increased use of documents of resolution. Additionally, respondents overwhelmingly said increased regulatory requirements and exam requirements are putting increased pressure on credit union resources.
The survey also revealed that 43% of respondents received one or more DORs during their last exam. Deputy General Counsel Mary Dunn said the ability to quantify the use of DORs will be helpful to CUNA as it works with the NCUA to reduce the use of the document. Previously, the trade group was only able to provide anecdotal feedback to the regulator on the issue.
“The biggest weakness in any advocacy program is a lack of actual information and hard fast data that substantiates your claim,” she said.” This allows us to sit down with regulators and show them what the data indicates, that there are too many DORs out there.”
Paul Gentile, CUNA’s executive vice president of strategic communications and engagement, agreed with Dunn. He said he launched the survey in New Jersey last year as president of the NJCUL because “credit unions are very vocal about exams that don’t go well, which is good, but the problem when advocating for credit unions is those are one-off stories.”
After presenting NCUA Director of Examination and Insurance Larry Fazio with the Region II findings last year, Gentile said he was pleasantly surprised with the regulator’s response. Exam scheduling problems with New Jersey credit unions were revealed in that survey, and Gentile said the NCUA has already remedied the problem.
Dunn also lauded the NCUA for its willingness to improve the exam process, saying her team has never sent exam suggestions developed by CUNA’s examination supervisory subcommittee because the NCUA has implemented the ideas faster than she could edit the document.
“We’re in a different place this year compared to last year, with the agency recognizing that improvements need to be made, and embarking upon those improvements,” she said. “But, so long as the economy is still improving, we will still have exam issues.”
Although the results will be used in advocacy efforts, Dunn said the statistics won’t be proactively used to call out the NCUA before legislators.
“The exam fairness bill is still out there, and it’s an important issue to credit unions, so to the extent that survey data substantiates what is being said on Capitol Hill, we’ll use it,” she said. “What we don’t want to do is paint the NCUA as unwilling to change because that’s not true. But there are still areas that need to be addressed.”
The exam results will be discussed at GAC during a breakout session on exam issues, Gentile said.
The NCUA was unable to comment on the survey at press time.