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Samantha: Hello, this is Samantha Shares.

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This episode covers N C U A’s
Enforcement Action Philosophy per

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its redacted Enforcement Manual.

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The following is an audio version of
that advisory and the press release.

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This podcast is educational
and is not legal advice.

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We are sponsored by Credit Union
Exam Solutions Incorporated, whose

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team has over two hundred and
Forty years of National Credit

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Union  Administration experience.

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We assist our clients with N C
U A so they save time and money.

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If you are worried about a recent,
upcoming or in process N C U A

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examination, reach out to learn how they
can assist at Mark Treichel DOT COM.

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Also check out our other podcast called
With Flying Colors where we provide tips

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on how to achieve success with N C U A.

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And now the N C U A’s enforcement
philosophy and enforcement alternatives.

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What is the agency's philosophy
on enforcement actions?

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N C U A must deal with a credit union's
problems before they become fatal.

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Success requires appropriate
action and timing.

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It also requires clear communications
between N C U A and the credit union's

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senior management and board of directors.

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Enforcement actions focus special
attention on the problems or weaknesses

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and prompts corrections by credit
union officials and management.

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Once N C U A staff identifies and
communicates problems or weaknesses

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to the credit union, senior
management and the board of directors

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are to correct them promptly.

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The examination report is the
first step in determining if an

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enforcement action is necessary.

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The actions a credit union takes or agrees
to take in response to the examination

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report will help determine whether to take
enforcement action and if so, what type.

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Enforcement actions may be taken as a
result of findings in an examination

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report or other supervision contact.

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Field staff need not wait for
the completion of the formal

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examination or follow-up examination
report to initiate these actions.

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This manual provides guidance in
selecting the action or combination

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of actions best suited to accomplish
corrective or remedial measures.

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The manual also promotes consistency
while preserving flexibility

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for specific circumstances.

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N C U A's long-term supervision strategy
takes into consideration not only the

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measures needed to address the credit
union's problems currently but also

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what measures will be needed in the
future if the credit union's problems

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develop into serious supervisory
issues threatening viability.

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Certain types of enforcement action may
also provide better transitions to more

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severe supervisory responses later if the
condition of the credit union warrants.

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This manual provides guidance on
the long-term strategy aspects of

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documentation for enforcement actions.

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The documentation of earlier enforcement
actions, of failure to comply, and

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of the consequences for the credit
union of that failure is an important

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part of establishing the record
for more severe subsequent action.

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1.

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What enforcement actions are available?

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Enforcement actions fall into two
broad categories: informal and formal.

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a.

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Informal enforcement actions

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Use Informal enforcement actions when
a credit union's overall condition is

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sound, but written commitments from
the board of directors is needed to

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ensure that it will correct problems and
weaknesses identified by N C U A staff.

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These enforcement actions provide
a credit union with more explicit

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guidance and direction than is normally
contained in an examination report.

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Agreement to an informal action
is evidence of the board's

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commitment to correct problems
before they hurt the credit union's

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performance or cause further
decline in its financial condition.

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Regional directors (RD) are
delegated the authority to issue

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informal enforcement actions.

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Informal enforcement actions are:

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►	Regional director letters.

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►	Non-published letter of
understanding and agreement.

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►	Establishment of special reserves

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►	Preliminary warning letters.

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b.

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Formal enforcement actions

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The N C U A may use a wide variety
of formal enforcement actions to

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support its supervisory objectives.

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Unlike most informal actions, formal
enforcement actions are authorized

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by statute (mandated in some
cases), are generally more severe,

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and are disclosed to the public.

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Also, formal actions are enforceable
through other formal enforcement

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actions, such as the assessment
of civil money penalties, and

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may require litigation before
an administrative law judge

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or a federal district court.

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Formal actions against a credit union are:

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►	Published letters of
understanding and agreement.

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►	Cease and desist orders.

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►	Civil money penalties.

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►	Prompt Corrective Action (PCA) directives.

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►	Termination of insurance.

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►	Conservatorship.

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►	Liquidation.

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2.

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How do I determine the appropriate
type of enforcement actions to use?

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Tailor the enforcement
action to the institution.

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Design an action to correct deficiencies
and return the credit union to a safe

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and sound condition as soon as possible.

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Normally start with the lowest
level of enforcement needed to

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correct the credit union's problems.

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Enforcement actions normally rise
from informal to formal as the

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administrative record develops, but
you may start with formal actions.

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Determining the appropriate informal
or formal action depends on:

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►	The overall condition of the credit
union (both current and projected).

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►	The severity of the
credit union's weaknesses.

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►	Whether the board and management
demonstrate the commitment and

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ability to correct the weaknesses.

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►	The existence of previously
identified but unaddressed weaknesses.

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►	The credit union's composite CAMEL rating.

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If a credit union fails to comply
with an informal enforcement action

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within the specified time and doesn't
justify the delay, promptly proceed

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with a formal enforcement action.

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If a credit union fails to comply
with a formal enforcement action,

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use even stronger actions, such as:

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►		Assessing civil money penalties
against the board of directors

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and credit union management.

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►	Enforcing the action in federal court.

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►		Starting a new enforcement action such as
requirement for merger, conservatorship,

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or liquidation of the credit union.

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This concludes the N C U A’s
Enforcement Action Philosophy per

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its redacted Enforcement Manual.

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If your Credit union could use assistance
with your exam, reach out to Mark Treichel

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on LinkedIn, or at mark Treichel dot com.

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This is Samantha Shares and
we Thank you for listening.