NCUA's Enforcement Options and Philosophy
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:
⺠Regional director letters.
⺠Non-published letter of
understanding and agreement.
⺠Establishment of special reserves
⺠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:
⺠Published letters of
understanding and agreement.
⺠Cease and desist orders.
⺠Civil money penalties.
⺠Prompt Corrective Action (PCA) directives.
⺠Termination of insurance.
⺠Conservatorship.
⺠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:
⺠The overall condition of the credit
union (both current and projected).
⺠The severity of the
credit union's weaknesses.
⺠Whether the board and management
demonstrate the commitment and
ability to correct the weaknesses.
⺠The existence of previously
identified but unaddressed weaknesses.
⺠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:
⺠Assessing civil money penalties
against the board of directors
and credit union management.
⺠Enforcing the action in federal court.
⺠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.
