NCUA Report - April 2012

Director’s Report:
Office of Examination and Insurance
A DIALOGUE ON THE EXAM PROCESS

Larry Fazio
Director
Office of Examination
and Insurance

Last month, Chairman Matz announced a nationwide series of “Listening Sessions” that will begin in May. The goal is to have a dialogue on how to improve the exam process and how to streamline regulations, as well as to discuss any other issues on the minds of credit union officials.

or when regulatory violations are noted.

To their credit, examiners are passionate about the mission of credit unions. Thus, they are very dedicated to their role as frontline guardians of the health of the credit union system. By and large, examiners fulfill this role with professionalism and distinction.

As NCUA’s Chief Examiner, I have heard a lot lately about the exam process, in particular the working relationship between examiners and credit unions. In the majority of cases, credit union officials have a good working relationship with their examiners. Management believes that the examiner is a valuable resource, and the exam process yields a beneficial external perspective. In other cases, credit unions report breakdowns in the process. There will always be tension inherent in this type of relationship, but the overall mood seems worse than usual.

Of course, tensions are still high; everyone has worked under a lot of pressure for a long time. Disagreements, even fervent ones, on the condition of a credit union and any necessary remedial actions are to be expected. While financial, operational, and regulatory matters are important elements of an examination, the exam process at its core involves the interaction of human beings. So, this is where we all need to start listening more.

“In particular, I am very interested in listening to ideas on how examiners and credit union management can better understand and recognize the challenges and demands of their corresponding roles, and the associated points of view. ”

In particular, I am very interested in listening to ideas on how examiners and credit union management can better understand and recognize the challenges and demands of their corresponding roles, and the associated points of view. I want to listen to suggestions on best practices NCUA examiners can use in achieving a results-oriented examination conducted with professionalism and empathy. When done right, you might not like the message, but you respect the means by which the examiner delivered it.

I also hope to hear recommendations for how credit union management should interact with examiners; they are people, too. We should discuss how to build a constructive working relationship and trust. Even though they might have different perspectives on how best to proceed, a conscientious management team has the same ultimate interest as the examiner: the health of the credit union.

Our society has gone through one of the most severe economic challenges since the Great Depression. The effects of the recession are still lingering. The crisis also taught us many lessons. From what we learned, we are now making the necessary regulatory changes that will produce some operational challenges for financial institutions.

CONTINUED ON NEXT PAGE

Advice Given During Level 4
New Examiner Training

Credit union management teams have had to cope with these economic challenges for a prolonged period. It has been difficult, and management teams still have much work to do.

; Begin in a friendly way.

; Let others do a great deal of the talking.

It has also been hard for examiners. The crisis necessitated long hours and a lot of time on the road for examiners. Being an examiner is a tough—and often thankless—job. Examiners must make difficult judgments about the risk a credit union represents to the Share Insurance Fund. We hold examiners accountable for achieving resolution when risk is excessive