WASHINGTON — NCUA is working to streamline the exam process and reduce the burden for credit unions, according to a top agency official.
Larry Fazio, director of NCUA's Office of Examination and Insurance, acknowledged concerns by credit unions who feel the exam process is too subjective. But he said the agency is working to lessen friction caused by the process, including spending more time offsite to speed the process.
"We are looking at really modernizing and improving [the exam process] and the goal will to be able to have more upfront interaction occurring electronically and offsite so that the exam process is a lot more efficient and we spend less time onsite," Fazio told CUNA's annual GAC conference during a panel discussion Tuesday.
Fazio noted that the number of reports that identify compliance issues within a credit union — known as a document of resolution — declined 18% between 2013 and 2014, in part because of NCUA's streamlined exam process and separating out lower level problems known as examiner's findings.
But some CU community insiders and experts say they are taking steps to empower their members to refute faults that an examiner may find at their institutions. Ken Ross, executive vice president at the Michigan Credit Union League, said his league created a group to identify challenges members were facing.
"One of the single biggest issues we ran into was a series of exam issues that were driving friction between the industry and the regulator," said Ross, who also spoke on the panel.
One problem was that different exam teams were requesting information to be presented in different ways.
"It brings a whole lot of work on to the credit unions doorstep at a time when they are looking to get the exam team in and out of the shop as quickly as possible," Ross said.
Patrick Smith, vice president at the Illinois Credit Union League said CUs in his area ran into similar issues and even singled out a few examiners that were particularly "heavy handed" in their examinations.
"A significant number of our credit unions reached out to us individually, and on the chapter level, a common theme was that they felt there were inconsistencies in the exam process and a lack of due process," said Smith, who spoke on the panel.
After a number of roundtables between Illinois credit unions and state regulators, credit unions helped get state legislation passed that would ensure more consistency among exams and implement steps to appeal an examiner's report if there are disagreements.
Tom Renz, president of $34.4 million Commodore Perry Federal CU in Oak Harbor, Ohio, who led a closely watched appeal of a NCUA examination, said sometimes CUs can get examiners that are "bad eggs" and there should be a better way to address flaws in an examiner's report.
"We have to have legitimate due process rights," Renz said, adding that there should be an independent appellate process that comes up with a binding opinion.
Fazio acknowledged that improvements should be made to the exam process, but said NCUA's modernization effort will help address many of these problems. He said the agency is updating its 20-year-old Automated Integrated Regulatory Examination System, which examiners use to conduct work on their laptops and is developing a better way for credit unions to provide information to NCUA before the exam starts.
"One of the things we are trying to fast track is the portal that allows examiners and credit unions to share information back and forth in a secure and much more convenient, facilitated way," Fazio said, adding that AIRES will eventually plug in to the new portal.
NCUA is also working on improving examiners' technological expertise by hiring "less generalists and more specialists," according to Fazio.
"We need to have the people with the right expertise to be able to examine you credibly and to make sure that we only raise issues that are legitimate issues," he said.
Fazio added that he would like the regulator to have more oversight of large third-party vendors that provide critical services to CUs.
"Because we don't have vendor authority it is hard for us to be in the room when information is being shared" Fazio said, adding that "it affects our ability to downstream information to credit unions and deal with vendors who just work with credit unions."
However, Fazio said he felt the NCUA could modernize its exam process and begin to oversee key third-party vendors "in a budget neutral way."