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I'm admittedly wet behind the ears when it comes to exams, but it seems to me the NCUA has little credibility at this point given their failure to regulate the corporates. Feel free to blast away if I'm wrong.
Also, credit unions certainly have a responsibility to be conservative in their practices but without prudent risk taking what's the point of our existence? The original point of credit unions was to take risks that no banks or other financial institutions would make. It seems as if our regulator has forgotten that.
This is exactly what happened at our recent exam. We are well, capitalized, well run, and very conservative and still got slammed because of percieved 'risk'.
It is difficult to assess whether the examiner attitudes and behaviors, or misbehaviors, constitute an aberration or a pattern. As the CEO of an association of primarily small, low-income credit unions, I get lots of complaints from my member institutions about examiner harrassment, pressure to merge, over-reaction, and so forth. We are attempting to gather a broader picture through a survey. Unfortunately, the fear of reprisals by NCUA stops most credit unions from publicly seeking redress or remediation of untoward examination experiences, or examiners.
A very good article. Thanks for sharing the CEO's perspective!
A very nice article. It explains much of the short-sidedness going on in the financial world today. Sometimes justifying one's job is more important than getting the facts straight. Good luck with the exam. Let's hope there is no quota of closings being set.
Excellent article, and very cogent points made by the anonymous CEO. There is no capital without earnings, and there are no earnings without some amount of risk.
The NCUA appears very concerned not just with increasing concentrations, but increasing anything. "Growth risk" is eighth risk being assessed by examiners. Credit unions with excessively high net worth (>20%) and slow or no growth get the regulatory blue ribbon of excellence.
I can only assume Jody Major would prefer all helpful lessons regarding the ugly truth of some NCUA examiner deficiencies be conducted behind closed doors. Heaven forbid the management and education of credit union examiners be brought into the open for all to benefit from. At least someone has the balls to try to help us communicate to the NCUA Board a wiser path to re-steer this ship [our industry] in the right direction. "Insightful" knowledge from lessons like this CEO's thoughts benefit not only NCUA but can also benefit millions of our members -- if NCUA demonstrates the ability to learn and think about the realities of running a successful credit union in an economic cycle. What are you afraid of?
Thank you [again] Chip. I only wish our trades would be more public about what we are all telling them (behind closed doors)!
Interesting article. There are over 7,000 federally insured credit unions and Mr. Filson picks the one where the CEO's comments give him the material to write a column. Amazing how he never writes about the good exams. There have to be a few.
But then, without controversy, who would read his "insights"
I have a suggestion for ferreting out more specifics on the growing disrespect for the agency and its examiners. Invite CUs to comment, with identities protected, on their experiences with:
1. How the examiners leave their work areas at the conclusion of their examineraion. Ask for pictures!
2. How DORs show "Agreed To" with the item cited when there was actually no adequate discussion of the item cited and certainly no explicit agreement with the examiner's action cite.
3. Why Boards of Directors are fearful of challenging an examiner's conduct or Report of Examination by appealing to the Regional Office within the very short appeal period window.
4. How examiners routine arrive late and leave early in the workday.
5. How examiners don't follow protocol in requesting information.
6. How examiners make suggestions cloaked as regulatory requirements.
7. How examiners are threatening, consdescending, arrogant, etc.
Certainly, ask for positive feedback as well and recommendations for improvements.
The feedback will be enlightening and compelling.
You will being doing the agency, its examiners and the industry a great service.
Jody, which part of NCUA do you work for? Is Chip really expected to write about the good exams? I believe they're all supposed to be competent exams, aren't they?
I agree with you that there are CEOs who underperform, and their exams reflect the numerous problems allowed or fostered under their care, but it's a fantasy to say that a problem exam [or examiner] is the result of a CEO not doing her job.
Afraid of? Not a thing. Credit Union CEO's who do their job have nothing to worry about. It's the ones who can only survive during good times that should be concerned. When the going get tough, they are gone.
Thank you Chip! Great article. I wish more light could be shed in this area. Unfortunately, most Credit Unions are silent because they fear the repercussions that they will face if they speak out.
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