The Credit Union Exam Cycle: Only If It's Right.
Byline: Michael Fryzel
The reason to do something should not be based on the premise that because someone else has done it makes it right.
The recent flood of individuals professing that because the Office of the Comptroller of the Currency and the FDIC have gone to an 18-month exam cycle for their banks mandates that the NCUA join its sister agencies in doing so for credit unions, is not a logical argument to make for regulatory relief.
For some time now, I have advocated that the NCUA board look at all regulations and practices put in place when the credit union industry was impacted by the corporate crisis and recession in 2008. We are now in 2016. Credit unions are stronger, the economy is getting better and regulators should look for areas where they can reduce controls and allow for greater flexibility in credit union operations.
The way to determine whether or not an 18-month exam cycle is right for some credit unions is for the NCUA board to review and investigate whether such an action is feasible. It should consider data that has been collected, listen to the arguments of proponents and others, have a discussion at an open board meeting and then after thoughtful consideration, make the decision it believes is best for the industry and its millions of members.
When the NCUA returned to a 12-month exam cycle, there were many good reasons for doing so. Those reasons were fully explained and the arguments against doing so were weak, unsubstantiated and illogical. So now, if there is going to be a change, it must be based on criteria of safety and soundness.
A good regulator makes decisions based on facts -- not emotion, rhetoric or pressure. A good regulator listens to reason and decides what is best for the industry it regulates. That is the method and approach the NCUA must take in making its decision on the length of exam cycles. And should it decide 18 months is the way to go, it must ensure that 18 does not become 24, 30 or even 36 as it previously did.
Because Paul jumped off the bridge into the water does not mean Peter should follow, unless Peter knows the jump won't hurt him.
Michael Fryzel is a Chicago-based attorney who was formerly chairman of the NCUA board. He can be reached at firstname.lastname@example.org.