Wednesday, May 18, 2016

How A Trade Association Adds Value.... Or Even Better: NCUA C'mon Heal Thyself!

"Bank exams too often are failing their purpose to keep banking strong and banks focused on serving customers.  Too many banks are worse off as a result of their exams."   - ABA Banking Journal 

So, what does the ABA do to address the concern? It hires two experienced, prominent financial experts  - Dr. Robert Litan (Kauffman Foundation/Brookings Institution) and Jerry Hawke (Washington lawyer/former head of the OCC) to conduct a study of the issue.

The study - "Value-Added Bank Supervision:  A Framework for Safely Fostering Economic Growth" - makes eight recommendations to improve the bank exam process:

  1. Customized Supervision - to fit bank's business model, location, charter, size.
  2. Focus on the "big picture"- risk-based, focused on things which really matter, rather than "gotcha" exercises.
  3. Clarity on Capital requirements - reality-based exams - effective, knowledgeable evaluations.
  4. Stress Testing - as an option to limit account/loan exam reviews.
  5. Risk Management of loan losses - more weight to GAAP practices and Allowance/reserve adequacy.
  6. Experienced Examiners - senior led, balanced depth; too much obvious inexperience.
  7. Cooperation with State Examiners - respect and recognize importance of State regulators and areas of expertise.
  8. Self-Review - assess whether what is preached  centrally is in fact practiced, in a timely, effective, and professional manner.

Sound fair? Reasonable....?

While the ABA works through these important issues with it's members "to improve the exam process, so banks can get back to the business of promoting economic growth"....
Traffic Circle "Leadership"?

  1. What have credit unions done about these issues?
  2. Why not?
  3. Who should be leading this effort?
  4. Why haven't they?
  5. What are we waiting for?

   .... what if we all decided to just work together openly on these issues?

[A "reality-based exam" would be nice for a change!]


Anonymous said...

Here's a common sense, money saving,practical idea to be used by NCUA to improve the way they do things and implement some good ideas. Read the Report prepared for the banking association. Assume something we already know, but some credit union people do not like to admit, banks and credit unions are alike in many ways. Pick from the report the ideas that can be implemented to improve how NCUA examines credit unions. No need for yet another committee or "internal" study group. No need to spend any money. The work has been done. the wheel does not need to be reinvented. No need for pride of authorship. Accept what's good, give the credit to whose idea it was and move on to the next challenge. Make NCUA great again.

Anonymous said...

Had me all the way to "again"