Removing Barriers Blog

Improving the Examination Process
Posted August 19,2015 by CUNA Advocacy

The fact that credit unions have concerns with the conduct and fairness of their exams surprises no one.  To bolster advocacy efforts on this issue, CUNA conducts an ongoing examination survey, giving credit unions the opportunity to provide feedback on their exam experience and providing us with data to use in our advocacy efforts with NCUA.  Dissatisfaction with examinations remains too high. This year more than three quarters of credit unions said that heavier regulatory and examination requirements are putting increased pressure on their credit unions.  About half of those surveyed said that examiners are applying guidance and best practices as if they had the force of regulation.  

While the numbers in general are somewhat improved compared to 2013 when we began the survey, they still speak to a need for reform, which is why CUNA supports H.R. 1941 / S. 774, the Financial Institution Examination Fairness and Reform Act (FIEFRA).  FIEFRA would bring fairness to the examination process by creating an independent ombudsman and an independent appeals process for examination disputes.  This means that instead of credit unions complaining about or appealing the decision of their examiner to his or her supervisor, they would have someone to go to at the Federal Financial Institution Examination Council to lodge their complaint.  We think this will help make an appeals process that has rarely, if ever, worked for credit unions, better. 

The good news is that these provisions were included in broader regulatory relief legislation that the Senate Banking Committee passed this year and they were also included in the Senate Appropriations Committee’s Financial Services and General Government Appropriations bill, meaning that they are positioned as well as they could be to potentially see action later this year.

The Cooperative Credit Union Association sent letter to NCUA this week addressing an issue that isn’t covered in the legislation:  the frequency of examinations.  While we quite regularly bemoan the prescriptive and restrictive nature of the Federal Credit Union Act, frequency of credit union examinations is one area where that is not the case.  While the Federal Deposit Insurance Act requires annual exams for banks above $500 million in assets and an 18-month exam cycle for banks below $500 million, the Federal Credit Union Act gives the NCUA Board wide latitude to set the frequency of examinations.  Some may remember that prior to 2009, many credit unions were on an 18-month cycle; like so many other things, that changed with the financial crisis and credit unions were brought under an annual exam cycle. 

We agree it’s time for NCUA to adjust the examination cycle, which is why we have encouraged them to do so, and we have asked Congress to help.  In a letter to the House Financial Institutions and Consumer Credit Subcommittee earlier this summer, we asked the Subcommittee to urge NCUA to “refine the examinations to be more consistent with the examination cycle for banks.”  But it should not take an Act of Congress to do this:  NCUA has the authority, and more than five years after the crisis, it is prudent and appropriate for the agency to take a close look at this.  We will continue to press them to do so.