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Samantha: Hello, this is Samantha Shares.

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This episode covers N C U A’s examiner
guidance on Preliminary Warning

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Letters to Credit Unions Per the
National Supervision Policy Manual.

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The following is an audio
version of that guidance.

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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 guidance.

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Preliminary Warning Letter Per
National Supervision Policy Manual

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Examiners will draft a P W L when a
credit union’s problems are serious

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or per- sistent and a credit union’s
board is unwilling to sign an LUA.

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A P W L will sup- port formal
administrative action such as a

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published LUA or Cease and Desist order.

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A P W L is a warning of potential
formal administrative action if

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corrective action is not taken.

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If formal administrative action
is taken, then the P W L is auto-

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matically removed and all action
items in it will be incorporated into

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the formal administrative action.

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There may be rare instances where both
a P W L and a formal administrative

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action are necessary to address
separate supervisory concerns.

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Examiners will only recommend that their
supervisor issue a P W L as a result

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of a regular examination, follow-up
examination, or supervision contact.

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Sample P W Ls and a BSA-specific
P W L are provided as resources

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for this section of the NSPM.

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A P W L is written from the
perspective of the RD, and includes:

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•	Direct, concise, and clear language

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•	A list of the serious area(s) of
concern and citation of the Federal

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Credit Union Act or regulation violated

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•	When the primary problem area is poor
management, include the fol- lowing

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text: "Your credit union is operating
in an unsafe and unsound manner for

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which substantial, immediate, and
corrective action must be taken.

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It is the board of directors’
responsibility, as the body providing

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general direction and control
for the credit union, to take

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necessary cor- rective actions."

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•	A statement of impending
administrative action by the NCUA

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•	Required actions and timeframes for
resolving the area(s) of concern

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DOS Responsibilities

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•	Review P W Ls for appropriateness
and process for RD approval

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•	Discuss all material
changes with the supervisor

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Exam Staff Responsibilities

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•	Obtain supervisor and ARD concurrence
for a P W L before preparing a let- ter

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•	E-mail draft P W L to the supervisor
for review when initiating the PSR1

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process

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•	The supervisor will review the report
to ensure the P W L is appropriate and

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supported and then forward it to their
region’s DOS2 mailbox when notifying

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DOS the PSR is ready for DOS review.

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Last updated October 14, 2021

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Deliver a Preliminary Warning Letter

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The supervisor will determine whether
to hand-deliver or mail a P W L

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based on the severity of the issues.

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For hand-delivered P W Ls:

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•	The supervisor will notify DOS3 of
the planned meeting date so the letter

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is dated accordingly (approximately
two to three weeks from the date exam

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staff4 submits the draft letter to DOS)

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•	Once the letter is approved and signed
by the RD, DOS will mail one ori-

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ginal copy of the letter directly to
the supervisor for hand-delivery and

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provide scanned copies to the examiner
and supervisor for recordkeeping

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•	The examiner and the supervisor
will deliver the P W L onsite to

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discuss the contents of the letter
(usually at a formal meeting with the

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credit union’s board of directors)

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•	Following the meeting, the examiner will
distribute the original, signed copy of

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the P W L to the credit union officials.

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•	The examiner and supervisor
maintain scanned copies of the

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signed P W L For mailed P W Ls:

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•	DOS will send the letter to the board
chairperson and copy the CEO5 as

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appropriate

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•	In special cases, DOS may send
the P W L to each board member.

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•	DOS will provide scanned copies to the
examiner and supervisor for their records

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•	The examiner and supervisor will maintain
scanned copies of the signed P W L

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Supervision Contacts for a
Credit Union with a P W L

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As described in the LUA section of the
NSPM, the frequency of examinations,

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follow-up examinations, and onsite
supervision contacts is driven by

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a credit union’s CAMELS1 ratings
and overall risk to the NCUSIF2.

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Examiners will con- sider any
outstanding administrative action

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when planning supervision and
assigning the CAMELS ratings.

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If an examiner encounters a credit union
with an outstanding administrative action

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(and associated risk) and the risk is
not reflected in the CAMELS rating (which

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drives the frequency of supervision),
they will discuss with their supervisor

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and plan their supervision accordingly.

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Unless there are extenuating
circumstances, and approved by the

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ARD, super- vision of credit unions
with outstanding administrative actions

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will be in line with national policy
for CAMELS 3, 4, and 5 credit unions

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(perform a follow-up examination at
least every 120 or 180 days (from

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completion date to start date).

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Examiners will:

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•	Prepare and distribute the
examination or supervision contact

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reports in the same manner as other
examinations and supervision contacts

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•	Document compliance with the P W L in
the Status Update during each con- tact

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•	The status of each item will be
listed as resolved or unresolved.

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Exam- iners will include comments
to support completion status.

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•	Document recommendations for future
action such as continue, modify,

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terminate the P W L, or proceed with
elevated or formal administrative action

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•	Examiners will refrain from recommending
a P W L be reissued, rewritten, or allowed

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to remain outstanding for long periods
(usually no longer than 12 months).

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•	Recommend removal of the P W L when it is
confirmed during a follow-up examination

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or regular examination the officials
have corrected the prob- lem areas and

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prepare a draft letter for the RD's
signature explaining the recommendation

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•	Recommend escalated administrative
action if a credit union has not

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cor- rected the problem areas within
the timeframes outlined in the P W L

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•	Escalated administrative action may
include a published LUA, Cease and

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Desist order, civil money penalty,
involuntary liquidation, or others.

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Refer to NCUA Instruction 4820,
Enforcement Manual, for processing

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pro- cedures for civil money
penalties, involuntary liquidations,

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con- servatorships, etc.

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Terminating a Preliminary Warning Letter

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When a credit union meets the
specific performance standards

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outlined in a P W L, examiners will
recommend termination of the P W L.

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Examiners will recom- mend the
termination of a P W L only after they

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complete an examination or contact
supported by adequate work papers

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showing the credit union has cor-
rected the problems cited in the P W L.

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When conditions warrant the termination
of a P W L, the examiner will prepare

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a draft P W L removal letter to
the credit union explaining why

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the RD is remov- ing the P W L.

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The examiner will forward the draft
letter to the supervisor with an

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explanation in the email supporting their
recommendation to terminate the P W L.

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After review, the supervisor will
forward the draft letter to DOS1 Mail for

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review and processing for RD signature.

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This concludes the N C U A’s examiner
guidance on Preliminary Warning

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Letters to Credit Unions Per the
National Supervision Policy Manual.

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

00:08:15.572 --> 00:08:18.342
on LinkedIn, or at mark Treichel dot com.

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This is Samantha Shares and
we Thank you for listening.