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This podcast provides you the ability to listen to new regulatory guidance issued by the National Credit Union Administration, and occasionally the F D I C, the O C C, the F F I E C, or the C F P B. We will focus on new and material agency guidance, and historically important and still active guidance from past years that NCUA cites in examinations or conversations. This podcast is educational only and is not legal advice. We are sponsored by Credit Union Exam Solutions Incorporated. We also have another podcast called With Flying Colors where we provide tips for achieving success with the N C U A examination process and discuss hot topics that impact your credit union.
Samantha: Hello, this is Samantha Shares.
This episode covers N C U Aâs examiner
guidance on Preliminary Warning
Letters to Credit Unions Per the
National Supervision Policy Manual.
The following is an audio
version of that guidance.
This podcast is educational
and is not legal advice.
We are sponsored by Credit Union
Exam Solutions Incorporated, whose
team has over two hundred and
Forty years of National Credit
Union Administration experience.
We assist our clients with N C
U A so they save time and money.
If you are worried about a recent,
upcoming or in process N C U A
examination, reach out to learn how they
can assist at Mark Treichel DOT COM.
Also check out our other podcast called
With Flying Colors where we provide tips
on how to achieve success with N C U A.
And now the guidance.
Preliminary Warning Letter Per
National Supervision Policy Manual
Examiners will draft a P W L when a
credit unionâs problems are serious
or per- sistent and a credit unionâs
board is unwilling to sign an LUA.
A P W L will sup- port formal
administrative action such as a
published LUA or Cease and Desist order.
A P W L is a warning of potential
formal administrative action if
corrective action is not taken.
If formal administrative action
is taken, then the P W L is auto-
matically removed and all action
items in it will be incorporated into
the formal administrative action.
There may be rare instances where both
a P W L and a formal administrative
action are necessary to address
separate supervisory concerns.
Examiners will only recommend that their
supervisor issue a P W L as a result
of a regular examination, follow-up
examination, or supervision contact.
Sample P W Ls and a BSA-specific
P W L are provided as resources
for this section of the NSPM.
A P W L is written from the
perspective of the RD, and includes:
⢠Direct, concise, and clear language
⢠A list of the serious area(s) of
concern and citation of the Federal
Credit Union Act or regulation violated
⢠When the primary problem area is poor
management, include the fol- lowing
text: "Your credit union is operating
in an unsafe and unsound manner for
which substantial, immediate, and
corrective action must be taken.
It is the board of directorsâ
responsibility, as the body providing
general direction and control
for the credit union, to take
necessary cor- rective actions."
⢠A statement of impending
administrative action by the NCUA
⢠Required actions and timeframes for
resolving the area(s) of concern
DOS Responsibilities
⢠Review P W Ls for appropriateness
and process for RD approval
⢠Discuss all material
changes with the supervisor
Exam Staff Responsibilities
⢠Obtain supervisor and ARD concurrence
for a P W L before preparing a let- ter
⢠E-mail draft P W L to the supervisor
for review when initiating the PSR1
process
⢠The supervisor will review the report
to ensure the P W L is appropriate and
supported and then forward it to their
regionâs DOS2 mailbox when notifying
DOS the PSR is ready for DOS review.
Last updated October 14, 2021
Deliver a Preliminary Warning Letter
The supervisor will determine whether
to hand-deliver or mail a P W L
based on the severity of the issues.
For hand-delivered P W Ls:
⢠The supervisor will notify DOS3 of
the planned meeting date so the letter
is dated accordingly (approximately
two to three weeks from the date exam
staff4 submits the draft letter to DOS)
⢠Once the letter is approved and signed
by the RD, DOS will mail one ori-
ginal copy of the letter directly to
the supervisor for hand-delivery and
provide scanned copies to the examiner
and supervisor for recordkeeping
⢠The examiner and the supervisor
will deliver the P W L onsite to
discuss the contents of the letter
(usually at a formal meeting with the
credit unionâs board of directors)
⢠Following the meeting, the examiner will
distribute the original, signed copy of
the P W L to the credit union officials.
⢠The examiner and supervisor
maintain scanned copies of the
signed P W L For mailed P W Ls:
⢠DOS will send the letter to the board
chairperson and copy the CEO5 as
appropriate
⢠In special cases, DOS may send
the P W L to each board member.
⢠DOS will provide scanned copies to the
examiner and supervisor for their records
⢠The examiner and supervisor will maintain
scanned copies of the signed P W L
Supervision Contacts for a
Credit Union with a P W L
As described in the LUA section of the
NSPM, the frequency of examinations,
follow-up examinations, and onsite
supervision contacts is driven by
a credit unionâs CAMELS1 ratings
and overall risk to the NCUSIF2.
Examiners will con- sider any
outstanding administrative action
when planning supervision and
assigning the CAMELS ratings.
If an examiner encounters a credit union
with an outstanding administrative action
(and associated risk) and the risk is
not reflected in the CAMELS rating (which
drives the frequency of supervision),
they will discuss with their supervisor
and plan their supervision accordingly.
Unless there are extenuating
circumstances, and approved by the
ARD, super- vision of credit unions
with outstanding administrative actions
will be in line with national policy
for CAMELS 3, 4, and 5 credit unions
(perform a follow-up examination at
least every 120 or 180 days (from
completion date to start date).
Examiners will:
⢠Prepare and distribute the
examination or supervision contact
reports in the same manner as other
examinations and supervision contacts
⢠Document compliance with the P W L in
the Status Update during each con- tact
⢠The status of each item will be
listed as resolved or unresolved.
Exam- iners will include comments
to support completion status.
⢠Document recommendations for future
action such as continue, modify,
terminate the P W L, or proceed with
elevated or formal administrative action
⢠Examiners will refrain from recommending
a P W L be reissued, rewritten, or allowed
to remain outstanding for long periods
(usually no longer than 12 months).
⢠Recommend removal of the P W L when it is
confirmed during a follow-up examination
or regular examination the officials
have corrected the prob- lem areas and
prepare a draft letter for the RD's
signature explaining the recommendation
⢠Recommend escalated administrative
action if a credit union has not
cor- rected the problem areas within
the timeframes outlined in the P W L
⢠Escalated administrative action may
include a published LUA, Cease and
Desist order, civil money penalty,
involuntary liquidation, or others.
Refer to NCUA Instruction 4820,
Enforcement Manual, for processing
pro- cedures for civil money
penalties, involuntary liquidations,
con- servatorships, etc.
Terminating a Preliminary Warning Letter
When a credit union meets the
specific performance standards
outlined in a P W L, examiners will
recommend termination of the P W L.
Examiners will recom- mend the
termination of a P W L only after they
complete an examination or contact
supported by adequate work papers
showing the credit union has cor-
rected the problems cited in the P W L.
When conditions warrant the termination
of a P W L, the examiner will prepare
a draft P W L removal letter to
the credit union explaining why
the RD is remov- ing the P W L.
The examiner will forward the draft
letter to the supervisor with an
explanation in the email supporting their
recommendation to terminate the P W L.
After review, the supervisor will
forward the draft letter to DOS1 Mail for
review and processing for RD signature.
This concludes the N C U Aâs examiner
guidance on Preliminary Warning
Letters to Credit Unions Per the
National Supervision Policy 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.