Samantha: Hello, this is Samantha Shares.
This episode covers N C U Aâs Enforcement Action Philosophy per
its redacted Enforcement Manual.
The following is an audio version of that advisory and the press release.
This podcast is educational and is not legal advice.
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And now the N C U Aâs enforcement philosophy and enforcement alternatives.
What is the agency's philosophy on enforcement actions?
N C U A must deal with a credit union's problems before they become fatal.
Success requires appropriate action and timing.
It also requires clear communications between N C U A and the credit union's
senior management and board of directors.
Enforcement actions focus special attention on the problems or weaknesses
and prompts corrections by credit union officials and management.
Once N C U A staff identifies and communicates problems or weaknesses
to the credit union, senior management and the board of directors
are to correct them promptly.
The examination report is the first step in determining if an
enforcement action is necessary.
The actions a credit union takes or agrees to take in response to the examination
report will help determine whether to take enforcement action and if so, what type.
Enforcement actions may be taken as a result of findings in an examination
report or other supervision contact.
Field staff need not wait for the completion of the formal
examination or follow-up examination report to initiate these actions.
This manual provides guidance in selecting the action or combination
of actions best suited to accomplish corrective or remedial measures.
The manual also promotes consistency while preserving flexibility
for specific circumstances.
N C U A's long-term supervision strategy takes into consideration not only the
measures needed to address the credit union's problems currently but also
what measures will be needed in the future if the credit union's problems
develop into serious supervisory issues threatening viability.
Certain types of enforcement action may also provide better transitions to more
severe supervisory responses later if the condition of the credit union warrants.
This manual provides guidance on the long-term strategy aspects of
documentation for enforcement actions.
The documentation of earlier enforcement actions, of failure to comply, and
of the consequences for the credit union of that failure is an important
part of establishing the record for more severe subsequent action.
1.
What enforcement actions are available?
Enforcement actions fall into two broad categories: informal and formal.
a.
Informal enforcement actions
Use Informal enforcement actions when a credit union's overall condition is
sound, but written commitments from the board of directors is needed to
ensure that it will correct problems and weaknesses identified by N C U A staff.
These enforcement actions provide a credit union with more explicit
guidance and direction than is normally contained in an examination report.
Agreement to an informal action is evidence of the board's
commitment to correct problems before they hurt the credit union's
performance or cause further decline in its financial condition.
Regional directors (RD) are delegated the authority to issue
informal enforcement actions.
Informal enforcement actions are:
âº Regional director letters.
âº Non-published letter of understanding and agreement.
âº Establishment of special reserves
âº Preliminary warning letters.
b.
Formal enforcement actions
The N C U A may use a wide variety of formal enforcement actions to
support its supervisory objectives.
Unlike most informal actions, formal enforcement actions are authorized
by statute (mandated in some cases), are generally more severe,
and are disclosed to the public.
Also, formal actions are enforceable through other formal enforcement
actions, such as the assessment of civil money penalties, and
may require litigation before an administrative law judge
or a federal district court.
Formal actions against a credit union are:
âº Published letters of understanding and agreement.
âº Cease and desist orders.
âº Civil money penalties.
âº Prompt Corrective Action (PCA) directives.
âº Termination of insurance.
âº Conservatorship.
âº Liquidation.
2.
How do I determine the appropriate type of enforcement actions to use?
Tailor the enforcement action to the institution.
Design an action to correct deficiencies and return the credit union to a safe
and sound condition as soon as possible.
Normally start with the lowest level of enforcement needed to
correct the credit union's problems.
Enforcement actions normally rise from informal to formal as the
administrative record develops, but you may start with formal actions.
Determining the appropriate informal or formal action depends on:
âº The overall condition of the credit union (both current and projected).
âº The severity of the credit union's weaknesses.
âº Whether the board and management demonstrate the commitment and
ability to correct the weaknesses.
âº The existence of previously identified but unaddressed weaknesses.
âº The credit union's composite CAMEL rating.
If a credit union fails to comply with an informal enforcement action
within the specified time and doesn't justify the delay, promptly proceed
with a formal enforcement action.
If a credit union fails to comply with a formal enforcement action,
use even stronger actions, such as:
âº Assessing civil money penalties against the board of directors
and credit union management.
âº Enforcing the action in federal court.
âº Starting a new enforcement action such as requirement for merger, conservatorship,
or liquidation of the credit union.
This concludes the N C U Aâs Enforcement Action Philosophy per
its redacted Enforcement Manual.
If your Credit union could use assistance with your exam, reach out to Mark Treichel
on LinkedIn, or at mark Treichel dot com.
This is Samantha Shares and we Thank you for listening.