Dollar explains to Arizona CUs the benefits of risk-based examinations

<p>TUCSON, Ariz. – NCUA Chairman Dennis Dollar has touted new procedures on risk-focused examinations as another example of the agency’s efforts to be more responsive to shifts in the marketplace while it moves away from the “one size fits all” concept in examinations. Addressing Arizona credit union executives here, the NCUA Chairman reiterated his agency’s willingness to be more flexible in how it examines CUs by reducing the number of examiner visits based on performance and net worth ratios. Depending on the condition of individual CUs, examinations can take place “once every 18 months” instead of once a year, but for those CUs “which need the help” xaminer visits would obviously be more frequent, declared Dollar in a keynote speech before the annual convention of the Arizona Credit Union League. The new policy on risk-based exams is in line with Regflex, incidental powers and other reforms Dollar said he has pursued at the agency to modernize the regulation process since his term began in 1997 and since he was appointed chairman Sept. 13, 2001. As he said in recent talks, Dollar said the decision by President Bush to appoint him on that date “when he obviously had more pressing matters” to deal with reflects the importance credit unions have in the financial marketplace. Regarding the new exam schedule, Dollar told the Arizona League audience NCUA examiners would be convened later this summer to undergo rigorous training on new procedures. In an interview after his speech, Dollar said the training sessions will be held in Orlando in August and that state examiners would be brought in as well. In his remarks, Dollar noted that since his term began he has worked hard to reduce the size of the agency, noting the number of employees has actually dropped slightly, a feat which is hard to deliver among federal agencies. His remarks on that topic drew applause from the CU executives. Later Dollar told Credit Union Times, the NCUA staff is currently at about 970 slightly below 2000-2001 figures. Dollar’s comments on the exam schedule follows the agency’s issuance of a letter to federal CUs last month explaining the benefits of the risk-focused exam program. The letter listed risk indicators in such areas as interest rates, liquidity, compliance, transactions labeling them as “high” “moderate” or “low.” In his talk here, the NCUA Chairman stressed determination of the risk factors would vary by institution since what would seem risky at one large institution would not be risky at another because of various mitigating factors. Nonetheless, the agency is pursing a philosophy which turns away from appearing to “micromanage” CUs as they examine them. The agency’s job is to act as referee and to make sure CUs “live by the rules” and no more, he said. “It is not our job to call the plays,” he said in a football metaphor which he has used frequently in his remarks to CU groups. The NCUA, he stressed, will be quick to clamp down on those CUs which “make up their own rules” in what he called a “sandlot version” of the regulatory game. The former Gulfport, Miss. CU executive said he understands the concerns of many small CUs who find themselves harassed by examiners who try to dictate policy and pursue minutiae in their examinations. Dollar recalled in his Mississippi CU of an examiner who “focused on a $50 travel voucher” instead of concentrating on more pressing matters of safety and soundness. Arizona CU executives said they were pleased with Dollar’s remarks though a handful lamented, as one put it, “I just wish some of those examiners were here to hear this kind of talk about micromanaging” adding “I’m afraid he has the wrong audience.” Dollar also urged CUs to pursue innovation and avoid “the comfort zone” considering the fierce competitive environment which lies ahead for the industry. He noted CUs while on the rise are still a very small player in the national landscape holding only 3% of the deposit base. Also at the League Convention, Peter Crear, CUNA’s chief operating officer, reviewed some of the more innovative moves CUs are making across the country to demonstrate community and political involvement. He urged CUs to do a better job of sharing their ideas through CUNA and industry-based internet vehicles. One of the highlights of the three day convention held at the El Conquistador Sheraton-and which mesmerized the audience- was a talk by Air Force Capt. Scott F. O’Grady, shot down in Bosnia seven years ago, in describing his six day ordeal “being hunted by an animal” until his rescue by U.S. Marines. O’Grady credited his religious faith and the national spirit as exemplified by the teamwork of his U.S. rescuers “in making me thankful for every day I am alive.” -</p> <p>[email protected]</p>