CUNA Backs, NCUA Opposes Exam Fairness Bill

Posted by Marissa Anema Thursday, February 02, 2012 11:28:00 AM

WASHINGTON – The Financial Institution Examination Fairness & Reform Act (H.R. 3461) is "a firm step in the right direction toward ensuring the federal financial institution regulatory agencies conduct fair exams, which are consistent with the law and regulation and ensure safety and soundness," West Virginia Credit Union League President/CEO Ken Watts said during yesterday’s House hearing testifying on behalf CUNA.

The hearing featured two witness panels: One comprised of Watts and other financial industry representatives who supported examinations reforms, and the other of federal regulators, such as NCUA Executive Director David Marquis. NCUA opposes the legislation as written.

The bill that was under scrutiny by the House Financial Services Subcommittee on Financial Institutions & Consumer Credit would allow credit unions and other institutions to discuss examination concerns with a newly created Federal Financial Institution Examination Council (FFIEC) ombudsman, and to appeal regulator decisions before an independent administrative law judge.

The bill would also give credit unions and other financial institutions access to decision-making information gathered in their exams and codify exam policy guidance for financial regulators.

Watts said H.R. 3461 would not solve all of the examiner issues that credit unions face, but added the attention that the U.S. Congress gives to examination issues "will lead the NCUA and the other regulators to take steps to ensure that examiners treat credit unions fairly and that they acknowledge credit unions should have the flexibility to manage risk, consistent with legal and supervisory requirements."

Watts said that credit unions often do not voice their concerns related to the examination process due to the fear of retaliation from regulators. However, he added, the proposed creation of a third-party regulatory appeals process would create a "much improved" examination process for credit unions.

Marquis testified that his agency recognizes that its examination process "can be improved and enhanced," but he warned that the bill could increase administrative costs, create new risks to the NCUSIF, and impose "a one-size-fits-all approach" to financial institution examinations.

H.R. 3461 was jointly introduced by the subcommittee chair and ranking member. It has 77 cosponsors including NJ Congressman Scott Garrett (R-5), a senior member of the House Financial Services Committee.

Watts’ testimony is available here.

Additional witness testimony is available here.


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