While NCUA Chairs have different leadership approaches, all share one common challenge: setting the “tone” for the relationship between the regulator and the regulated.
Whether a chair is a hands-on manager or distant from operations, the chair’s attitude toward the industry will be seen and heard by all within and without the agency.
For the past decade the relationship between NCUA and credit unions has varied from openly adversarial to indifference to credit union knowledge and judgments. There has been a lack of respect for the experience, capabilities, and analysis of credit union professionals. This attitude is still present in some exam confrontations, and at the board level, in the total dismissal of required credit union commentary on issues such as the merger of the TCCUSF and NCUSIF.
The Relationship Needed
Chairman Hood enjoys opera. He is not tone deaf. His professional experiences focus on outreach efforts. The tone needed between NCUA and the regulated is one of mutual respect.
This is more than public speeches or a specific set of policy initiatives. NCUA should acknowledge the overwhelmingly positive track record of credit unions and their leaders’ deep, proven, expertise: wisdom and commitment to cooperative evolution.
A Place to Start with a New Tone
On May 7, NCUA released the names of nine credit unions who were fined a total of $4,069 in civil money penalties for late filing of the September 2018 call report, which was due at the end of October.
For nearly four decades NCUA had never fined a credit union for a late call report. During this time the report was extended semi-annually to quarterly, and the data requested increased exponentially.
NCUA’s rationale for public fining was in part because the late filers were holding up the timely release of all credit union data.
So, six months after the deed has occurred, NCUA releases the names for public shaming and sends the pennies collected to the US Treasury.
Timely submission of call reports is critical. But instead of fining shouldn’t the agency just send to all examiners the day after each filing deadline all reports not received? Examiners make a follow up phone call, and if not filed promptly, that would warrant a special visit.
Why the delay? Is it due to bookkeeping shortcomings (no timely cash reconciliations), personnel issues, or even operational problems?
How much staff time and effort has been wasted analyzing each late report with the three criteria below—and how many were not fined as a result of these investigations?
Mutual respect would direct that the agency use any report delay as a signal for examiner follow up. Get the data, forget the shaming and get on with the process of ensuring a safe and sound credit union operation.
Stop the penny ante, power trip of imposing a “parking ticket” fine. Treat credit unions with respect knowing that problems occur all the time that should be looked into.
Putting a CMP scarlet letter stamp and publishing the name of credit unions as an example of effective regulatory oversight is not professional. Some in authority may believe acting tough makes them effective. Most will see it as lacking grasp of the situation.
Regulators live in a glass house. Until McWatters became Chair, NCUA had failed to meet the statutorily deadline of April 1 for submitting its Annual Report to the President and Congress for decades–even missing the filing entirely in one year.
Chairman Hood, take away the CMP stamp and ask examiners to do their job. It would be a small, but important first step, in making the system more cooperative.