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LEARNING CENTER

5 Strategies to Avoid Risk During Your Credit Union’s Next Regulatory Examination

By Brad Powell

Brad Powell

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Do you know of a credit union that looks forward to its next regulatory exam?

Examinations aren’t designed to be pleasant, even when you are doing everything right. When you miss a detail or provide conflicting information, that’s when authorities raise concerns. 

There are strategies to make the process less painful, while at the same time better protecting your organization from an examiner’s finding (or even worse, a DOR!) from NCUA. Other credit unions have found the following strategies valuable and worthwhile:

1. Make It Simpler, Not More Complicated.

Regulatory examinations are complex. Having to answer just one question from a regulator can generate internal anxiety and a flurry of actions.  A full set of exam questions can be a nightmare to organize.

So the management of your credit union’s response (through either automated or manual activities) should strive to make the process simpler and more transparent.

2. Include the Right People.

Make a list of your reliable, go-to experts.  Ask yourself who else in the organization could provide insight? Who else needs to review the material before you hand it over?  When and how should I involve our outside counsel? Just ask yourself: Who else?

3. Tightly Restrict Access. Guard Against Broad Legal Discovery.

Absolutely include the right people. But only share what they need to see, and only involve them when they need to be involved. Avoid sharing any sensitive material via email. Doing so could expose all of your email communications to legal discovery.

4. Audit Trail, Audit Trail, Audit Trail.

When anything happens, it needs to be auditable.  Who authored this response?  Who saw it but didn’t provide feedback?  Who reviewed this?  Who didn’t review this? 

All activity should be easily accessible.  Having a clear audit trail can help you achieve confidence internally and give regulatory authorities confidence in your process.

5. Leverage the Past.

Over the years, your organization likely has invested a lot of time in examination responses.  Don’t reinvent the wheel every time.  Leverage the people you’ve relied on in the past.  Leverage the responses you’ve produced in the past.

Did we miss a key factor? If you think so, let us know in the comments.

If you want to get a sense of the range of issues that come up with credit union examinations, feel free to check out this short video:

Watch Redboard 101 Video

Topics: Resources, Coordination, General Counsel, CEO, Compliance Officer

Brad Powell

Written by Brad Powell

Brad Powell runs Redboard, a company that helps credit unions better respond to regulatory examinations. He has 20 years of experience developing technology for credit unions and financial services companies.

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