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<p>ALEXANDRIA, Va. – NCUA Board member Deborah Matz held a meeting with credit union leaders to discuss unintended consequences in the examination process. The candid dialogue between regulator and regulated was hailed a success by attendees. “There was some feeling amongst the credit unions that when they make loans to the underserved or even when they consciously do something risky and it’s part of their business plan.that it’s held against them, even if it’s part of the business plan [or] if they have a high capital ratio, that it’s still held against them perhaps because it was risky and it didn’t turn out well,” Matz said. She explained that NCUA Director of Examination and Insurance Dave Marquis, who attended the meeting, would take the comments made during the meeting into consideration when examiners are retrained this August. Examiners will also be prepped for a full week on the risk-based examination process at that time. Additionally, NCUA is going to attempt to replace some examiners with new ones with an eye towards more diverse backgrounds, such as economists and financial analysts. “I have to say that I’m very excited about the change (in the exam process). I think it will take sometime for us to get through some of these issues and for the training to get out in the field and be effective, but I think [NCUA] is heading in the right direction,” Ron McDaniel, CEO of Point Magu Federal Credit Union, commented in a press conference following the meeting. “What was the real eye opener for us was hearing from other credit unions that were not traditionally `CDCUs’ but some of the issues they encounter in serving low-income or underserved populations are identical to the ones we’ve encountered over the last 15 or 20 years,” Cliff Rosenthal, executive director of the National Federation of Community Development Credit Unions, said. “I think that will hopefully provide fertile ground for us to explore what the best practices are in terms of serving these populations and also to reach a better understanding with the examiners.” “I think to some degree over the years our credit unions who’ve specialized in serving low-income communities didn’t find much understanding from the examiners. They were considered a kind of breed apart,” said Rosenthal. He noted that examiners seemed to view CEOs of low-income credit unions as doing something wrong because the credit unions have lower return on assets or higher expenses. Rosenthal explained that serving low-income communities would affect ratios because they have special needs. Attendees also pointed out that if a credit union with 12% capital wants to try a program that could drop their capital level to 11%, they should not be penalized for it. In response, board member Matz vowed NCUA would take these activities into consideration. “We’ll look at results of course because of safety and soundness issues but assuming that there’s sufficient capital, there will be a close look into whether this particular endeavor was part of a business plan and management’s involvement in making those decisions to proceed along that path,” she said. Matz added, “The examination process should not be an attempt to play `gotcha.’ It should be working together.” Additionally, Matz said she was aware of examiners that intentionally downgrade a credit union’s CAMEL rating in an effort to work more closely with them. “They feel that the credit union might need more hands-on help so they want to keep going back quarterly so those would be inclined to give the credit union a lower CAMEL rating even though they really merit a higher rating. That’s not the approach we ought to be taking,” the regulator said. NAFCU Senior Vice President and General Counsel Bill Donovan commented, “The meeting today sent very clear signals regarding the agency and Ms. Matz’ genuine interest in hearing from the credit unions that are affected by the examination process and examination procedures. It reflects a genuine effort to make sure that the examination process is accomplishing its goals and not bringing about unintended negative consequences.” CUNA Associate General Counsel Mary Dunn echoed Donovan’s remarks. “They really want to look at what barriers might exist that the agency has erected that actually limit credit union ability to reaching out and serving the underserved,” she said. Donovan proceeded to highlight credit unions’ efforts in general to serve low-income persons. Of the five credit union CEOs attending the meeting, he said, “what quickly emerged was the commitment of all five of those credit union CEOs and those credit unions to provide service to those of modest means, to reach out to those who are otherwise underserved.” Though the meeting only included five credit union CEOs, Seymour Johnson Federal Credit Union President and CEO Rob McKenzie said he was taking the discussions to the streets of his home state. “There was only a handful of us in that room, but I’m going to go back to North Carolina, and I’m going to talk to other credit union CEOs and board members and say `Hey, NCUA really does have a human aspect to it.’ ” “ They’re looking for dialogue,” he added. “Don’t be afraid to make your feelings known. I think that’s significant.” Also attending the meeting held by Matz were NCUA Acting Executive assistant to Matz Mike McKenna, NCUA Executive Director Len Skiles, NCUA Director of Public and Congressional Affairs Cliff Northup, NAFCU Director of Regulatory Affairs Gwen Baker, NAFCU Economist Tun Wai, CUNA General Counsel Eric Richard, CUNA Economist Bill Hampel, The Summit Federal Credit Union President and CEO Mike Vadala (via conference call), Alternatives Federal Credit Union President and CEO Bill Myers, and NRS Community Development Credit Union President and CEO Eunice Rogers. [email protected]</p>

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