By Vic Pantea
The NCUA’s revised Risk-Based Capital rule is dominating the news. While many are rightly focused on this particular rule and its perceived and actual shortcomings, the swell in attention also presents an opportunity to look at the larger picture of regulation and our examining bodies.
Credit unions should be asking themselves whether it’s time to work with the NCUA on how it regulates—today is the day for Examination Innovation.
The goal of Examination Innovation is to lower the cost of examinations and to improve the manner in which credit unions interact with their examiners. Over time the process has morphed into one that completely disrupts the operations of CUs and, in some cases, stymies credit union leaders from making the decisions necessary to grow their businesses and support their members’ needs.
It has been a long time between improvements in the examination process. Regulators claim to be doing more and sending more people, but where is the innovation in the sharing of data? Where are the improvements in the speed of data movement, the clarity of measurement models, and the transparency needed for our member-owners?
5 Examiners On-Site For a Month! Why?
The NCUA needs to take a hard look at its operating expenses, and to reallocate resources from staffing to technology. In some cases, five or more examiners sit in a credit union office for a month at a time, and in the case of state-chartered CUs that are federally insured, they’re getting a double-dose! Why?
Invest in technology that will reduce the operating budget—one that ballooned from $134.3 million in 2003 to $228 million in 2012—simplify how the examination process is done, and cause fewer interruptions to credit unions’ daily operations. A sharing of best practices and joint efforts to develop new tactics for improved exam tools and practices could leverage and multiply both the intellectual capital and financial resources of both NCUA and state regulators for the benefit of all stakeholders.
Credit unions need to put in some effort too. Complaining about the cost of compliance accomplishes nothing unless you can quantify what that expense actually is. Then work with vendors to not only reduce those costs, but to develop new technologies to speed the transfer of key data from the office to the NCUA. Improve how you complete the 5300 call report. Improve your Board’s financial literacy. Create new systems that facilitate the movement of data at lower costs.
To be clear, asking these types of questions isn’t advocating for a fight, but for a meaningful debate that will draw credit unions and their regulators closer together. Otherwise, the gap between the two will only keep growing.
The CU industry needs Examination Innovation.
Vic Pantea is manager of Marketplace Alliances with CU*Answers. For info: www.cuanswers.com.