FFIEC Issues Policy Statement on Exam Reports
Written by Brandy Bruyere, Vice President of Regulatory Compliance, NAFCU
I wanted to start out a bit differently today because we need your help. NAFCU is surveying our members on any issues with finalizing 2018 HMDA LARs. If you are a NAFCU member, please consider filling out our survey or sending it to the person at your credit union who handled this year’s LAR. We’d greatly appreciate that feedback to use in our advocacy efforts. If you already responded, thank you for taking the time from your busy schedule to give us a hand.
Some of you may have seen that the FFIEC released a “Policy Statement on the Report of Examination” on Wednesday and wondered, what is this all about? Overall, NCUA and other financial regulators are working on an exam modernization project that covers multiple initiatives and goals including but not limited to:
- More efficient exams and reduced burdens;
- Replacing outdated exam systems (like the AIRES questionnaires);
- Improved consistency and accuracy in supervisory determinations; and
- Enhanced coordination with state level regulators/examiners.
This week’s policy statement rescinds one issued in 1993 that mandated that the report of examination have three categories of pages:
- A core section to document exam conclusions;
- Optional core pages supporting exam findings; and
- Supplemental information “as needed or required by a particular agency.”
Rather than this dated method, the FFIEC concluded that “a principles-based approach” for completing exam reports would be a better fit, given advancements in technology and financial regulators' efforts to modernize the supervision process. Specifically, the regulators see this policy shift as promoting consistency and communication among members of the FFIEC while still allowing individual regulators, like NCUA, to document exams in a manner that considers the unique characteristics of each financial institution.
What does this mean for credit unions? The policy statement sets forth key principles that establish minimum expectations for exam reports. Many of these may not seem different from credit unions’ current experiences with the exam process. Some of the principles include:
- Including basic identifying information (credit union’s name, location, identifier, and the time period or date of exam);
- Providing examiner conclusions in order of importance;
- Documenting the credit union’s condition and risk profile (including CAMEL ratings) and issues of supervisory concern like noncompliance with laws & regulations or ongoing issues from the last examination; and
- Requesting signatures of the board of directors to acknowledge they received and reviewed the report.
Time will tell what this means for upcoming reports of examination, but there are other documents that provide additional insights. NCUA’s Examiner’s Guide has an examination report writing section that is pretty high level but covers similar topics as the FFIEC policy statement. The Guide also advises examiners to follow an internal Communications Manual and “plain writing” guidelines. Additionally, the agency issued a Letter to Credit Unions back in 2013 providing information on how exam reports were being modernized, such as adjustments to the exam overview and the handling of Documents of Resolution. Since that time, some of the enclosed content has moved to the online examiner’s guide, but there are still templates there for findings and DORs are still available.